Q3 Rental Demand Fell to 13-Year Low Due to Record-High Prices
New York, NY, October 26, 2022-After a long stretch of record-high rents, Americans are renting fewer apartments as demand in the third quarter fell to its lowest level in 13 years, reports the Wall Street Journal.
“Some renters are choosing to take on roommates, while others are boarding with family or friends. More people are opting to stay longer in their parents’ homes or moving back in, rather than pay steep rent increases, according to a recent UBS survey.
“Apartment demand in the quarter, measured by the one-year change in the occupancy of units, was the lowest since 2009, when the U.S. was feeling the effects of the subprime crisis, according to rental software company RealPage. Measured quarterly, the drop in demand was the worst of any third quarter-normally prime leasing season-in the more than 30 years RealPage has compiled the data.
“Meanwhile, the apartment-vacancy rate rose to 5.5% in the third quarter, up from 5.1% the quarter prior, according to property data firm CoStar.
“Rents have risen 25% over the past two years, according to rental website Apartment List, pushing many renters beyond what they can now afford. Meanwhile, inflation on other essential goods, such as food and energy, is also eating into how much people have left to spend on housing.
“‘It’s a signal that rent can’t continue at the same level it has sustained over the last couple of years,’ said Michael Goldsmith, an analyst at UBS. ‘We’ve reached a point where renters are maybe willing to pull out of the market.’
“The apartment rental market looks to be cooling following a boom that started in early 2021. After the introduction of a Covid-19 vaccine, many people-especially younger people who had been living with their parents-rushed to rent in cities around the country. That boosted apartment demand and put upward pressure on rents. Some rental apartments were even subject to bidding wars.
“Record high housing prices also played a role. They priced out many Americans who wanted to buy starter homes but instead have remained captives of the rental market. Home prices are now falling on a monthly basis, however, according to the latest S&P CoreLogic Case-Shiller National Home Price Index.
“Rental prices have started to fall on a monthly basis for the first time in nearly two years, too, while other recent data points also show that renters are starting to push back.”