Apartment Rents Teeter On Negative Growth As Supply Set To Surge

U.S. apartment rents might set a new trend, with the possibility of year-over-year negative growth rates emerging as early as next month.

What Happened: With rents in August registering a marginal 0.28% rise compared to the same period last year, a continuation of the trend may come as soon as September, CNBC suggests, citing RealPage.

For perspective, the annual growth rate stood at 11% a year ago.

U.S. rents saw negative rent growth just three times in the past three years, a brief lull caused by Covid-induced lockdowns in 2020, a 0.5% downtick in May of this year, and Friday’s print for August.

Elevated mortgage rates, combined with soaring home prices and limited availability, have anchored potential buyers to the rental market, and at the same time, 460,000 new units are slated for completion this year, marking a 50-year high in construction.

Read also: Monthly Mortgage Payments Just Hit All-Time High — And Prices Jumped The Most In 10 Months

The influx is poised to favor the renters, as the introduction of half a million units will erode landlords' pricing power — not to mention the million units that have been built in the last three years

On a more granular level, several cities are seeing negative year-over-year growth. Austin and Phoenix, both recording a 4.9% dip, lead the descent, closely followed by Las Vegas, Atlanta, and Jacksonville, Florida.

Forecasts hint at the supply shock heading into the next year, potentially keeping rents on a more downward or subdued trajectory until 2025.

For investors, here are a few stocks in the housing development space to keep an eye on.

• AvalonBay Communities Inc AVB
• UDR Inc UDR
• Mid-America Apartment Communities Inc MAA
• Apartment Investment and Management Co AIV
• Essex Property Trust Inc ESS

Read next: August CPI Preview: Investors Brace For Inflation Uptick, Headache Looms For Powell

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