Supply continues to do its thing: For the first time in many decades, apartment rents are rapidly flattening (and could soon go negative) at the same time demand remains healthy.
Why? Apartment construction is at 40 year highs-- shifting the balance of power to renters.
YoY, effective asking rents for new leases (same-store) inched up just 0.28% and could turn negative by September.
Compare 2023 to the last two times (excluding 2020 pandemic year): early 2000s and 2009. In those prior two periods, rents fell as recessions hit, jobs were lost, demand evaporated and vacancy hit 7-8%. By comparison, in 2023, vacancy has been fairly stable since January in the mid 5% range.
Demand is solid, but operators are giving on price in order to compete and to protect occupancy / cashflow.
That'll likely continue through 2024 as supply peaks, before 2025-26 as supply by then will be significantly less.
The rent slowdown won't show up in CPI until early-ish 2024. But it'll happen. CPI rents won't go negative by then, but they'll look pedestrian at that point.