Housing experts expect that a boost in apartment inventory in 2024 will dampen rent growth. However, affordability woes will persist.
Commercial property firm CBRE estimates that rent prices will only grow 1.2% this year, bringing the vacancy rate above the pre-pandemic level, the Wall Street Journal reported. However, the occupancy rate will remain above 94%, according to CBRE’s U.S. Real Estate Market Outlook 2024.
About 900,000 units are currently under construction, and 440,000 new units are expected to be completed in 2024, according to the report. Construction completions have already peaked in Chicago, Washington, D.C. and Las Vegas. In 2024, Austin, Dallas, Nashville and Atlanta will add the most units to their markets.
Overall, 2023 saw the largest number of apartments under construction ever recorded since 1973, according to Robert Dietz, the chief economist of the National Association of Homebuilders.
However, the slowing of rent growth won’t have a direct impact on most cost-burdened renters. According to property management software site Yardi, the majority of renters will remain locked in leases that were signed before rent prices started to soften.
For investors, single-family rentals have emerged as a better hedge against slowing rents than apartments in 2023. As home and financing prices were too high for prospective buyers, many turned to single-family rentals instead, buoying demand. In the third quarter of 2023, big public real estate companies that rent out single-family homes, such as Tricon Residential, Invitation Homes and AMH, each posted rent increases greater than 6% year over year.
