The construction boom in the U.S. has led to a decrease in rent prices, offering renters more options and benefits. This surge in construction activity, particularly in the multifamily housing sector, has resulted in a record number of available units for rent. Landlords are now offering rent concessions to attract tenants, such as discounts, incentives, or perks like free rent weeks or parking spaces. According to Zillow Group, about one-third of landlords across the U.S. provided rent concessions in July, which is a significant increase from the previous year.
In July, the median asking rent prices for apartments in various sizes saw a decline. One-bedroom apartments fell by 0.1% to $1,498 a month, two-bedroom units decreased by 0.3% to $1,730, and three-bedroom or more units were down by 2% to $2,010. While rents are still relatively high due to increases during the pandemic, there has been a flattening of rent growth, which is positive news for renters.
Certain regions in the U.S., particularly in Florida and Texas, have seen significant declines in rent prices as more units become available. For example, in Austin, Texas, the median asking rent price fell by 16.9% in July compared to the previous year. Similarly, Jacksonville, Florida, experienced a 14.3% decrease in rent prices during the same period. Overall, rent concessions have increased in 45 of the 50 largest metro areas in the U.S., indicating a trend of declining rent prices in various regions.
Historically, wage growth has been closely linked to rent growth. According to Orphe Divounguy, a senior economist with Zillow’s Economic Research team, the tightness of the labor market often predicts the tightness of the housing market. Recent data shows that wage growth has slowed, with wages and salaries increasing by 5.1% in June for the 12-month period. While this is positive news for renters, the slowing wage growth trend needs to be closely monitored.
The labor market has shown signs of easing, with more job candidates than available positions. This trend has implications for the rental market, as wage growth plays a significant role in supporting housing demand. As wages continue to grow relative to rent prices, renters may find it more affordable to secure housing. However, with wage growth peaking in January 2022 and slowing down since then, the long-term impact on the rental market remains uncertain.
The construction boom in the U.S. has had a noticeable impact on rent prices, with a significant decrease observed in various regions. Renters are now benefiting from more options, lower prices, and rent concessions offered by landlords. While the link between wage growth and rent prices remains a crucial factor, the recent trend of slowing wage growth raises questions about the future stability of the rental market. Renters and landlords alike will need to closely monitor these developments to navigate the changing landscape of the housing market.