Soaring rents threaten a cold spell for leases as renters turn their backs on pricey units and sink demand to its lowest in recent history.
Rental demand in the third quarter dipped to its lowest point since 2009, according to RealPage data reported by the Wall Street Journal reported. The dive in the summer months came in stark contrast to the first quarter, when demand hit its highest point since 2001’s fourth quarter.
The rental software platform illustrates demand by evaluating one-year shifts in apartment occupancy. Demand fell off across numerous major markets, declining significantly from recent quarters in New York City, Los Angeles, Houston, Dallas and Chicago.
The drop in demand was also the worst for a third quarter since RealPage began tracking data more than 30 years ago.
For landlords, that’s particularly concerning since the summer months are typically the hottest leasing season. Apartment vacancy ticked up in the third quarter to 5.5 percent from 5.1 percent in the second quarter, according to CoStar data.
With rents up 25 percent in the past two years, according to Apartment List data, renters are looking for ways to cut costs.
In the last six months, 18 percent of respondents to a September UBS survey said they lived rent free with friends or family, up 11 percent year-over-year. It was the highest response to the question since UBS first asked it in 2015.
“It’s a signal that rent can’t continue at the same level it has sustained over the last couple of years,” UBS analyst Michael Goldsmith told the Journal. “We’ve reached a point where renters are maybe willing to pull out of the market.”
— Holden Walter-Warner