A 50-year high in multifamily housing starts and completions has led to slowing rent growth and better lease deals for tenants. In July, 33.2 percent of rents on Zillow included concessions — a 23 percent increase from 2023.
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A 50-year high in multifamily housing starts has been a big boon to renters as rent growth slows and more landlords sweeten leases with discounts and other perks. According to Zillow’s latest market report, 33.2 percent of rentals on the site included perks in July, up 23 percent from a year ago.
Photo credit: Zillow
“Construction companies have stepped up and built an incredible number of homes in response to rising rents during the pandemic, and renters are now seeing the benefits,” said Zillow’s chief economist Skylar Olsen said this in a written statement. “Now is a good time for renters to get a bargain, as more new apartments are coming onto the market than at any time in decades.”
Nearly 60,000 multifamily homes were listed for rent online in June, with more than 882,900 units still under construction. The last time the U.S. multifamily market experienced a construction boom of this magnitude was in 1973, when privately owned new construction for buildings with five or more units peaked at 919,700 in July.
However, multi-family home builders have slowed down as the quarterly vacancy rate (6.6 percent) has reached its highest level since winter 2021.
Due to increased inventory, rent growth for multifamily properties declined for the second month in a row in July, falling to 5.1 percent – a far cry from the double-digit rent increases seen in 2020 and 2021.
Raleigh, North Carolina (53.3 percent); Charlotte, North Carolina (53 percent); Atlanta (52.2 percent); Salt Lake City (50.9 percent); Nashville, Tennessee (50.8 percent); and Austin, Texas (50.5 percent) led in the share of rentals with concessions. Meanwhile, San Jose, California (-9.7 percent) saw the largest decline in rentals with concessions, indicating an increasingly competitive market.
The latest report from GOBankingRates sheds some light on California’s rental market as renters grapple with an increasingly complicated answer to an age-old question: rent or buy? The report says California’s buy and rent markets are among the most expensive in the country, with renters and homeowners facing monthly living costs in the high four-digit range.
In San Jose, the average household has an annual income of $136,010. If a homeowner purchases a median value home ($1,472,661), he or she can expect monthly mortgage payments of $8,720, assuming a 10 percent down payment and securing a conventional 30-year loan at an average interest rate. Renters, on the other hand, pay an average of $3,243 for rent.
When other living expenses are included, the monthly cost of living for a typical homeowner in San Jose ($11,159) is 49.08 percent higher than that of a typical renter ($5,682), making renting the best deal.
Olsen said the trend could continue for the rest of 2024 as “a softening labor market and lower mortgage rates” impact the market.
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