If there is one item of really good news in Apartment.com’s new report on rent trends it is that the gap between supply and demand has appeared to narrow.
Supply jumped by 133,300 units in the fourth quarter of 2024, while fewer units were absorbed, with just 113,200 units leased.
“However, the gap between supply and demand is now at its smallest over that same period, suggesting more balanced market conditions,” the report noted. “For the full year 2024, absorption reached 556,800 units, a 70% increase over the prior year.”
The report showed a slippage in national year-over-year rent growth from 1.1% to 1%, pushing rents up modestly from $1,712 at the end of 2023 to $1,729 in December 2024. However, on a quarterly basis, rents fell by 0.4% -- the second successive quarterly dip. The vacancy rate remained at 8%.
Once again, the Midwest performed best in terms of annual asking rent growth, boasting five of the top 10 cities in this category. Detroit led the nation with 3.2% rent growth over the year, followed by Kansas City (3%), and Cleveland (2.8%). Mid-Atlantic cities including Richmond, Washington, DC and Norfolk – all with 2.7% higher rents -- followed.
The biggest slump in annual asking rent was recorded by Austin, down 4.8%. Cities that saw smaller rent dips over the year included Denver (down 2.9%), San Antonio (down 2.4%), Jacksonville (down 2.2%), and Phoenix (down 2.1%). The Sun Belt as a whole accounted for eight out of the 10 worst-performing markets.
On a quarterly basis, only six of the top 50 markets showed higher rents compared to the previous year. They were Tampa, San Francisco, Palm Beach, Cleveland, and Milwaukee. Rents remained flat in Norfolk, Columbus, Baltimore, the East Bay, Fort Lauderdale, and Pittsburgh. They fell in the remaining markets.
The report also highlighted significant differences in rent growth between more expensive and moderately priced assets.
Absorption was highest in the four and five-star apartment categories, which also had the highest supply. Some 429,000 units were leased in the fourth quarter – but that segment also showed the weakest rent growth at just 0.2%. Its vacancy rate stood at 11.4% at the end of 2024.
“In contrast, year-over-year rent growth of mid-priced assets reached 1.3% at the end of 2024 with a vacancy rate of 7.3%,” the report noted. “Improving consumer confidence, lower inflation, and sustained economic expansion likely helped boost demand in this segment.”