Apartment rents across the U.S. recorded a third consecutive monthly decline in November, signaling a further cooldown in the U.S. housing market.
The latest data from real estate platform RealPage showed asking rents for new leases nationally fell 0.59% in November, the third-largest monthly cut since 2010 outside of the pandemic-altered months of April and May 2020.
While rents typically dip this time of year "this isn’t just normal seasonality in 2022," Jay Parsons, VP, Head of Economics & Industry for RealPage, said in a release.
On a year-over-year basis, national effective rent growth for new leases came in at 6.5%, the lowest since June 2021, and down from the peak of 15.7% in March 2022, according to RealPage.
According to Parsons, the biggest factor weighing on rents today is a lack of new household formation, not renters swapping a rental for a purchase. In fact, renter turnover in November came in at the second-lowest level on record, according to RealPage's data.
“Inflation and economic uncertainty are having a freezing effect on major housing decisions. When people are uncertain, human nature is to go into 'wait and see' mode,” Parsons wrote. “Net new housing demand is dependent on household formation — which drove the 2021 housing surge but appears to have frozen earlier this year.”
Declines in asking rents come as apartment occupancy has fallen slightly below pre-pandemic levels due to weak new leasing demand, the report found. As of November, occupancy sat at 95.1%, down from 2019 levels of 95.6%.
Leasing traffic among potential tenants tumbled last month, with prospective lease traffic falling to the lowest level for the month of November since 2014.
“We’ve never before seen new-lease apartment demand freeze up during a period of solid job gains like it has this year,” Parsons stated. “We’re on track to end 2022 with the weakest net apartment demand since 2009.”
Regionally, cities that saw the fastest growth in rents in 2021 are seeing the largest pullback.
Destination hotspots like Fort Walton Beach, FL, and Boise, ID, saw asking rents fall around 2% month-on-month, and RealPage notes Las Vegas and Phoenix are poised to become the first major metros to see year-over-year rent drops as we head into 2023.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv