Apartment cooldown continues nationally as rents drop for third consecutive month

The U.S. apartment market continued its slowdown last month, the third consecutive month of declining rents.

By Ashley Fahey  –  Editor, The National Observer: Real Estate Edition

The U.S. apartment market continued its slowdown last month, the third consecutive month of declining rents.

Same-store effective asking rents for new leases nationally fell 0.59% in November, according to Richardson, Texas-based RealPage Inc. Not only is it the third month in a row of declines, but November was the third-largest month-over-month cut since 2010. The other two months that posted bigger reductions since 2010 were April and May 2020, at the onset of the Covid-19 pandemic.

Jay Parsons, head of economics and industry principals at RealPage, said the apartment market cooldown started earlier than what is typical of seasonal leasing trends this year.

“We had a much weaker summer and an early fall leasing season than we typically do,” he said. “… (T)his year, we saw abnormally weak leasing throughout the summer and so occupancy rates were already coming down, and then we saw even more of a slowdown in the last few months.”

Apartment occupancy nationally has fallen slightly below pre-pandemic highs as a result. Occupancy in November was at 95.1%, less than the 95.6% occupancy observed in November 2019.

With a record amount of new apartment construction hitting the market next year, lease-up activity will likely take a short-term hit, Parsons said.

“Supply is structural but demand is cyclical,” he continued. “For 2023 in particular, it’s very unlikely that demand will keep pace with supply. Some of these lease-ups will take longer to fill up. It’s going to be very, very competitive.”

In fact, that’ll likely give renters more bargaining power next year, Parson said, as apartment properties compete for occupancy.

Areas like Fort Walton Beach, Florida, and Boise, Idaho saw the biggest month-over-month cuts last year, or about 2%. Honolulu and Vallejo/Fairfield/Napa, California, saw year-over-year declines last month. That may suggest destination-type markets are seeing an outsized slowdown in apartment demand than other markets.

Among larger metropolitan areas, tech-centric cities are seeing more pronounced apartment rent declines, which could be correlated with job losses being disproportionately felt in those places. As tech workers tend to skew younger, Parsons said, they’re more likely to be renters than homeowners. That means apartment markets in tech-concentrated cities may continue to be impacted by job losses and a slowdown in hiring, should those employment trends continue.

How the broader rental market performs will influence how much investors, a small but significant purchasing group in the for-sale market, will buy homes with the purpose of renting them out.

Orphe Divounguy, senior economist at Zillow Group Inc. (Nasdaq: ZG), said despite the recent slowdown, rents remain relatively high where they’ve been historically. He said he thinks landlords, ranging from institutional groups to mom-and-pop investors to people turning a second home into rental income, will continue to buy homes with the purpose of renting them out in 2023, even with a slowing housing market.

One of Zillow’s key predictions for 2023 is that rents will rise faster than home values next year, which could compel more people to list their homes as rentals. also has a positive outlook for the rental market in 2023, predicting it to grow 6.3% in 2023, outpacing its expectations for home-price growth next year and historical rent trends.

Notably, though, investor home purchases declined 30.2% annually across the U.S. in Q3, according to Redfin Corp. (Nasdaq: RDFN) data. Sheharyar Bokhari, senior economist at Redfin, said in a statement accompanying that data it’s unlikely investors will return to the market in a big way until home prices fall significantly.

Danielle Hale, chief economist at, said in a recent interview she thinks investors will outpace primary homebuyers next year because they’re less likely to be using a mortgage to buy a home. On a net basis, investors will likely gain a bit of market share next year, at least among groups who can use cash to get into the market, she added.

Speaking strictly about the apartment market, it tends to follow a similar trajectory as for-sale housing, Parsons said. Higher mortgage rates could contribute, on the margins, to higher retention rates in the rental market but that doesn’t create new demand for rental housing, he added.