The construction boom in the United States has had a significant impact on the rental market, leading to lower rents and other benefits for renters. With record levels of construction activity since the pandemic, there has been a surge in the supply of empty units, resulting in more inventory being available for renters. In June, more multifamily units were completed than in any month in nearly 50 years, according to Zillow Group, an online real estate marketplace. This increase in supply has prompted landlords to offer rent concessions, such as discounts, incentives, or perks, to attract new renters.
According to Zillow, about one-third of landlords in the U.S. offered at least one rent concession in July, a noticeable increase from the previous year. As a result, the median asking rent prices for apartments in one- to three-bedroom units fell in July for the first time since 2020, based on data from Redfin, a real estate brokerage site. The median asking rent price for studio or one-bedroom apartments dropped to $1,498 a month, two-bedroom apartments decreased to $1,730, and units with three bedrooms or more were down to $2,010.
Regions like Florida and Texas, which have seen a significant number of newly built apartments since the pandemic, are experiencing substantial rent price declines 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, the largest drop among all analyzed metro areas. A similar trend was seen in Jacksonville, Florida, where the median asking rent price declined by 14.3% in the same timeframe.
Historically, wage growth and rent growth have been closely intertwined, as explained by Orphe Divounguy, a senior economist with Zillow’s Economic Research team. The state of the labor market can often predict the conditions in the housing market. Recently, the labor market has been softening, with more job candidates than available positions. This has led to slower growth in nonfarm payrolls and an increase in the unemployment rate. However, rising wages have helped to support housing demand, with wages growing at a rate of 4% to 5% year over year.
Challenges and Opportunities for Renters
While the construction boom has provided some relief for renters by driving down prices, there are also challenges on the horizon. Wage growth, which had peaked earlier in the year, has started to slow down, returning to pre-pandemic levels. As the labor market continues to adjust, it is expected that the rental market will also experience some changes. It will be crucial for renters to monitor these trends and make informed decisions based on their individual circumstances.
Overall, the construction boom in the U.S. has had a dual impact on renters, offering both benefits and challenges. While increased supply has led to lower rents and rent concessions from landlords, the changing economic landscape and labor market conditions may pose future uncertainties for renters. It is essential for renters to stay informed, evaluate their options carefully, and adapt to the evolving rental market dynamics.