Soaring rents threaten a cold spell for leases as tenants turn their backs on expensive units and sink demand at lowest in recent history.
Rental demand in the third quarter hit its lowest point since 2009, according to RealPage data reported by The Wall Street Journal reported. The slump in the summer months contrasts sharply with the first quarter, when demand hit its highest level since the fourth quarter of 2001.
The rental software platform illustrates demand by assessing year-over-year changes in apartment occupancy. Demand fell in many major markets, down significantly from recent quarters in New York, Los Angeles, Houston, Dallas and Chicago.
The decline in demand was also the worst for a third quarter since RealPage began tracking data more than 30 years ago.
For landlords, this is of particular concern since the summer months are generally the hottest rental season. Apartment vacancy rose in the third quarter to 5.5% from 5.1% in the second quarter, according to CoStar data.
With rents up 25% over the past two years, according to data from Apartment List, tenants are looking for ways to cut costs.
Over the past six months, 18% of respondents to a September UBS survey said they were living rent-free with friends or family, up 11% year-on-year. This was the highest answer to the question since UBS first asked it in 2015.
“It’s a signal that rent cannot continue at the same level it has maintained for the past two years,” UBS analyst Michael Goldsmith told the Journal. “We’ve reached a point where tenants may be ready to pull out of the market.”