Redfin Report: The Sun Belt Is Seeing Some of the Biggest Rent Declines in America

Rhea-AI Summary

Redfin's latest report highlights significant rent declines in several U.S. metro areas, particularly in the Sun Belt and Seattle. The median asking rent in Seattle fell by 7.3% year-over-year in April, the most substantial drop among the cities analyzed. Sun Belt metros like Austin, Nashville, and Jacksonville also experienced notable declines.

While the Sun Belt has seen a surge in new apartment construction, resulting in increased vacancies and reduced rents, the overall U.S. median asking rent rose 1% to $1,648 in April, marking the first increase in a year. The Midwest and Northeast contributed to this rise due to their new apartment supply and higher demand.

Redfin’s new rental market data methodology resulted in slight variances compared to previous reports. Elevated mortgage rates are sustaining rental demand, despite affordability challenges. The report also notes that rents remain just 3.1% below the peak in August 2022.

Positive

• Nationwide median asking rent rose by 1% in April to $1,648, the first increase in a year.
• Rents in the Midwest and Northeast saw significant increases, boosting the national average.
• The Midwest remains the most affordable region, with rising demand supporting rent increases.
• New rental market data methodology introduced by Redfin for more accurate analysis.
• Increased housing supply in the Sun Belt has improved affordability for renters.

Negative

• Seattle's median asking rent fell by 7.3% year-over-year, the largest decline among analyzed metros.
• Sun Belt metros like Austin, Nashville, and Jacksonville experienced significant rent declines.
• Four of the ten metros with the steepest rent declines are in Florida.
• Elevated mortgage rates are keeping some potential homebuyers in the rental market, affecting affordability.
• Despite recent increases, rents are just 3.1% below the record high of $1,700 in August 2022.

Insights

Financial Analyst

The data presented indicates significant shifts in rental prices across various U.S. regions, particularly within the Sun Belt and Midwest areas. Sun Belt cities experiencing notable rent declines can signal a correction in the rental market following the pandemic-driven surge. Investors should watch how rental income will be impacted for companies with significant exposure to these regions. Lower rental prices could translate to reduced revenues for property management firms and REITs (Real Estate Investment Trusts) heavily invested in these areas.

In contrast, the modest nationwide uptick in median asking rents suggests a stabilization after the volatile swings experienced during the pandemic. The increase in the Midwest's rental prices indicates strong demand, likely due to its relative affordability, which could present investment opportunities in these markets. However, the overall economic climate, including elevated mortgage rates, continues to influence rental and housing markets, implicating broader economic conditions.

From a retail investor's perspective, this data could inform investment decisions in real estate stocks or REITs, particularly those focused on residential rental properties. Long-term, the reduction in Sun Belt rents could improve affordability, potentially stabilizing markets. Yet, it could also imply a short-term revenue dip for investors in these regions.

Market Research Analyst

The data highlights critical trends in rental markets that could affect broader real estate dynamics. The Sun Belt rent declines illustrate a rebalancing act as supply catches up with demand—a typical market response post-boom. This trend could affect market sentiment, particularly for investors focusing on growth in these previously high-demand areas.

In the Midwest, the rising rents underscore the region's growing attractiveness, partly due to its affordability amid nationwide housing concerns. This can boost local economies and attract more residents and businesses, which in turn could support further real estate developments and investments.

Interestingly, the stagnant home prices on Florida’s west coast due to natural disaster-driven insurance crises reveal the intertwined nature of real estate, environmental issues and insurance costs. Investors should be aware of these external factors when analyzing potential returns and risks in such areas.

Therefore, from a market standpoint, this report reinforces the importance of understanding regional dynamics and how macroeconomic factors, like mortgage rates and environmental risks, play a critical role in shaping local real estate markets.

Nationwide, the median asking rent rose 1% to $1,648 in April—the first increase in a year

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) —The median asking rent in Seattle fell 7.3% year over year in April, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s the biggest drop among the U.S. metros Redfin analyzed.

Next came nine Sun Belt metros: Austin, TX (-6.6%), Nashville, TN (-5.9%), Jacksonville, FL (-5.6%), Miami (-5%), San Diego (-4.7%), Phoenix (-4.6%), Charlotte, NC (-4.5%), Tampa, FL (-4.3%) and Orlando, FL (-3.2%).

Metro-level data in Redfin’s report covers apartment asking rents in 33 major U.S. metropolitan areas. National data represents the entire U.S. Please note that this report marks the debut of Redfin’s new rental market data methodology, which is why some figures may not match up with figures in past rental reports. A detailed methodology is available in the report.

“The Sun Belt has built a ton of new apartments in recent years, partly to meet the surge in demand brought on by the flood of people who moved in during the pandemic housing boom. But the boom is over, and now property owners are struggling to fill vacancies, which is causing rents to fall,” said Redfin Senior Economist Sheharyar Bokhari. “The good news is that the uptick in housing supply in the Sun Belt has improved affordability for renters, which can be a lesson for other American cities grappling with housing affordability challenges.”

Rents in some Sun Belt markets are also just coming back down to earth after skyrocketing to unsustainable levels during the pandemic, Bokhari added.

Seattle is not in the Sun Belt, but like the Sun Belt, it has seen a surge in apartment construction in recent years.

Apartment construction across the U.S. has been slowing lately, but there’s still a pipeline of recently built units coming online, which is one reason the rental vacancy rate has risen.

It’s worth noting that four of the 10 metros with the steepest April rent declines are in Florida. A separate Redfin report covering the homebuying market found that on the west coast of Florida—which is facing a housing insurance crisis due to intensifying natural disasters—home prices are stagnating as housing supply surges.

Nationwide, Asking Rents Rose for First Time in a Year—Driven By Increases in the Midwest and Northeast

The median U.S. asking rent rose 1.1% year over year to $1,648 in April—the first gain in a year. Asking rents climbed 1.7% from a month earlier.

While rents ticked up in April, they’re stable relative to the rollercoaster ride of the past few years; U.S. asking rents rose as much as 17.6% year over year during the pandemic, and then fell as much as 4.1% this past summer.

Rent climbed fastest in the Midwest, which hasn’t been building as much as the Sun Belt. The Midwest is also the most affordable region to live in, which helps buoy demand at a time when housing affordability is strained across most of the country.

In Minneapolis, the median asking rent jumped 10.3% from a year earlier in April—the biggest uptick among the metros Redfin analyzed. It’s followed by Cincinnati (9.9%), Chicago (9.1%), New York (8.9%), Washington, D.C. (8.6%), Indianapolis (8%), Virginia Beach, VA (7.7%), Houston (6.7%), Boston (5.7%) and Detroit (4.9%).

Elevated mortgage rates are likely bolstering U.S. rental demand, and as a result, propping up prices. The average 30-year-fixed mortgage rate is more than double the 2.65% record low hit during the pandemic. Some renters are putting off their home purchasing plans because monthly payments for homebuyers are near their all-time high.

While asking rents aren’t rising at the meteoric pace they were during the pandemic, they remain elevated—causing affordability challenges for some renters. The median asking rent in April was just $52 below (-3.1%) the record high of $1,700 in August 2022.

To view the full report, including charts, additional metro-level data and updated methodology, please visit: https://www.redfin.com/news/redfin-rental-report-april-2024

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240517129535/en/

Redfin Journalist Services:

Kenneth Applewhaite, 206-414-8880

press@redfin.com

Source: Redfin

FAQ

What is the recent trend in Seattle's median asking rent?

Seattle's median asking rent fell by 7.3% year-over-year in April, the largest decline among the metros analyzed by Redfin.

Which Sun Belt metros saw the biggest rent declines in April?

Austin, Nashville, and Jacksonville were among the Sun Belt metros with significant rent declines, with Austin's rent falling by 6.6%.

How much did the U.S. median asking rent rise in April?

The U.S. median asking rent rose by 1% in April to $1,648, marking the first increase in a year.

Why are rents declining in the Sun Belt?

Rents in the Sun Belt are declining due to the surge in new apartment construction and increased vacancies as the pandemic housing boom ends.

How did the Midwest affect the U.S. median asking rent?

The Midwest saw significant rent increases due to new apartment construction and higher demand, contributing to the rise in the U.S. median asking rent.

What is the new rental market data methodology by Redfin?

Redfin introduced a new rental market data methodology in their latest report to provide more accurate and comprehensive analysis.

How are elevated mortgage rates impacting the rental market?

Elevated mortgage rates are keeping some potential homebuyers in the rental market, sustaining rental demand despite affordability challenges.