U.S. Asking Rents Climb for Second Consecutive Month in May

According to the latest data from Redfin, U.S. asking rents increased for the second month in a row, reaching their highest level since 2022.

Jordan B. & Han-Gwon Lung
June 13, 2024

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Good morning. After 11 months of declines, asking rents are now up two months in a row, with Midwest metros leading the nation. Plus, the Fed anticipates only one rate cut for the rest of 2024, revising its terminal rate projection to 5.1%.

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RENT REPORT

Asking Rents Up For 2nd Straight Month, at Highest Level Since 2022

Source: Fortune/Getty Images

According to the latest data from Redfin, U.S. asking rents increased for the second month in a row, reaching their highest level since 2022.

What happened: The median asking rent in the U.S. climbed 0.8% year over year in May to $1,653, marking the highest level since October 2022. This follows an increase of 0.9% in April after 11 months of declines. On a month-over-month basis, rents rose 0.5%. The supply of new apartments, which surged during the pandemic, continues to keep rent increases in check despite high demand, particularly from young renters facing an unaffordable homebuying market.

Stable vacancies: The rental vacancy rate has been steady at 6.6% for the past three quarters, the highest since 2021, but no longer growing as it did during the pandemic. While rents have stabilized compared to the extreme fluctuations during the pandemic, the median asking rent is just $47 below the record high of $1,700 from August 2022, posing ongoing affordability challenges for renters.

Regional disparities: Notably, DC led the pack with 11.1% higher asking rents on a YoY basis, followed by Cincinnati, Chicago, Virginia Beach, and Minneapolis. Midwest metros have mostly enjoyed higher rents thanks to an affordable lifestyle and limited new construction. In contrast, Sunbelt metros like Jacksonville, San Diego, Austin, Seattle, and Phoenix all reported lower rents.

Source: Redfin

➥ THE TAKEAWAY

Big picture: Overall rent declines are slowing, with the National Association of Realtors noting that the trend “bottomed out” in February 2024. This trend could impact inflation and spotlight the urgent need for more housing construction. NAR’s data shows that even after 10 months of decline, the U.S. median rent is only 1.4% ($24) below its August 2022 peak, yet remains $306 (21.5%) higher than pre-pandemic levels in 2019.

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✍️ Editor’s Picks

Workin’ at the car wash: KKR & Co is acquiring a significant minority stake in Quick Quack Car Wash for $850 million to enhance marketing and expansion.
Fed forecast: The Federal Reserve anticipates only one rate cut for the rest of 2024, revising its terminal rate projection to 5.1%.
Deeply distressed: CRE distress hits a new record for the third consecutive month, up 14 bps to reach 8.49% in May. Special servicing is at 8.09%, while delinquencies are up to 5.8%.
Stockyards revamp: Fort Worth may spend up to $1B revamping its famous Stockyards to include 300KSF of commercial space, 295 multifamily units, 3 hotels, and 1.3K parking spaces, just in case.
New CEO, new era: CrowdStreet has appointed John Imbriglia as its new CEO to lead its strategic growth plans following recent scandals and decreased deal volumes.
The job engine: In May, employers added 272K jobs, beating expectations of 180K and signaling strong employment growth nationally.
Changing of the guard: Shawn Katz replaces Michael May as president of $5B Silverstein Capital Partners, which specializes in real estate financing.
Golf’s revival: Colorado’s Cornerstone Club offers a 7,800-yard golf course as data indicates that up to 123M Americans (or nearly a third of the population) are now golfing or at least watching golf.

🏘️ MULTIFAMILY

Multifamily momentum: SearchS2 Capital buys apartments in Austin as Narrow Road Group focuses on the South Congress area, revealing ongoing Texas multifamily deals.
Housing hopefuls: Amazon (AMZN) commits another $1.4B to affordable homes, aiming to build 14K units in Seattle and Nashville. They e-commerce giant has pledged $3.6B so far.
Education is priceless, Fall 2024 student housing pre-leasing occupancy rates stand at 78.6% of university beds claimed, according to RealPage, with varied rent growth trends.
Rental retreat rising: Continental Properties obtained development rights for 11 acres in the Mundelein district of Chicago and are planning a 147-unit apartment complex with amenities.
Second time’s the charm: Brookfield Properties (BN) is eyeing a $350M sale for the 1,200-unit 3333 Broadway complex in Manhattan, lowering its asking price from $400M.
Sonder shake-up: Short-term rental company Sonder Holdings (SOND) plans to close 80 properties and lower rents at 25 of them, saving $40M with termination fees under $20M.

🏭 Industrial

Sky-high potential: Shapack Partners looks to offload an industrial building near Bally’s $1.7B casino, primed for high-rise redevelopment.
Phoenix frenzy: CapRock Partners secures $25.6M in financing via CB&T for a 244KSF industrial property in Mesa, AZ.
Investing in growth: Stonelake Capital Partners acquires 727KSF of industrial space in Goodyear for $108M, leveraging funds exceeding $746 M.
Warehouse wonderland: Shopoff Realty Investments acquires a 55-acre property in Inland Empire East for a 1MSF distribution center with 167 docks.

🏬 RETAIL

Shipping squeeze: Retailers, including Walmart, Target, and Kroger, are raising prices and utilizing the latest technology to boost profits amid rising logistics costs.
Georgia success: Big V Property Group and Equity Street Capital acquired the Johns Creek Town Center, a 303.3KSF shopping center in Suwanee, GA.

🏢 OFFICE

Building bonanza: Bargain hunters are snatching up aging office buildings for up to 70% off, signaling ongoing distress in the $2.4T sector.
Rethinking spaces: Warner Bros. Discovery (WBD) consolidates 235KSF at 30 Hudson Yards, overcoming market challenges for Related’s flagship property.
Fifth refinancing: Vornado Realty Trust (VNO) secures $400M in refinancing for a 315KSF mixed-use property at 640 Fifth Ave.

🏨 HOSPITALITY

Funding Fort Worth: Fort Worth Heritage LLC plans a $630M investment in Stockyards with 300KSF of commercial space, 500 hotel rooms, and 300 apartments.
CEO Shake-Up: LuxUrban Hotels (LUXH) replaces CEO Kothari with COO Arigo amid financial turmoil, plummeting the stock price by 96% YTD.