Rents rose for a third straight month as construction slowed and demand stayed strong
The US rental market saw its sharpest annual increase in asking rents since late 2022, with the median rent rising 2.6% year over year to $1,790 in August, according to real estate giant Redfin. This marked the third consecutive month of annual gains after a period of stagnation, and put rents just $70 shy of the all-time high set in summer 2022.
Rising rents have been propelled by a mix of strong demand and a slowdown in new apartment construction. The number of new apartments completed dropped to a seasonally adjusted annual rate of 385,000 in July, down 45.4% from the August 2024 peak of 705,000.
Permits to build new apartments have also fallen by more than 20% since the pandemic construction boom, Redfin reported. While some renters have recently been able to negotiate perks like free parking or reduced rent, these concessions may become less common as supply tightens.
Chicago posted the largest annual jump among major metros, with median asking rents up 10.7% to $2,275. San Jose, Philadelphia, Pittsburgh, and Washington, D.C. also saw increases above 8%. Only three markets—Austin, Louisville, and Jacksonville—recorded declines, with Austin’s rents falling 3.1%.
Smaller apartments saw the steepest price hikes. Rents for 0-1 bedroom units rose 4.4% to $1,650, while two-bedroom rents climbed 3.6% to $1,920. Larger apartments (three or more bedrooms) saw no annual change, holding steady at $2,199.
“Apartment construction boomed during the pandemic, but many of those projects have since wrapped up and fewer new ones are breaking ground,” Redfin senior economist Sheharyar Bokhari said.
“Builders are pumping the brakes due to high financing costs, elevated construction expenses and weaker investor appetite. With fewer new apartments coming on the market, renters have fewer options to choose from and landlords are regaining the ability to raise prices,” Bokhari said.
The rental surge comes as homebuying remains out of reach for many Americans, with mortgage rates and home prices still elevated. “High homebuying costs are keeping more people in the rental market, which is supporting demand even as supply growth slows,” Bokhari said. This dynamic is likely to persist, with construction headwinds and investor caution expected to limit new supply in the near term.
Home prices continued to climb, with the median sale price up 1.6% year over year to $392,738. While monthly payments have eased from their peak, they remained 5% higher than a year ago. Inventory growth also slowed, with active listings up 11.3%—the smallest increase in 18 months.
“Some would-be home sellers are now opting to stay put because they don’t think they’ll get the price they want,” Redfin’s previous report noted.
Redfin economists cautioned buyers against waiting for further rate drops, noting that current mortgage rates already reflect expectations of a Federal Reserve rate cut.
Affordability pressures in the for-sale market have pushed more households into renting, especially in high-cost metros. “In certain parts of the country, renters may be able to negotiate discounted rent, flexible leases or free parking. But these perks may be short-lived given that apartment construction is expected to slow and rental demand is expected to remain strong,” Bokhari previously said.
