2024 US Rental Trends: Luxury Drops, Average Rents Rise

The 2024 US rental trends reveal a compelling split in the market: while luxury rentals are witnessing price drops, the average renter is grappling with escalating costs. This divide highlights significant shifts in housing affordability and availability across the United States.

Luxury market downturn: In high-end real estate markets like Austin and Chicago, luxury apartments and upscale homes are experiencing significant price reductions. This is due to a glut in construction, leading to an oversupply. For instance, high-end homes in Austin that once rented for $5,000 to $8,000 a month are now available at up to 20% off. The overall U.S. rent growth was just 0.3% in 2023, the slowest since 2010, indicating a broader trend of stagnation at the top end of the market.

Middle-market rent growth: Contrastingly, the middle and lower segments of the rental market have not seen such relief. Rent for these tiers increased by about 2% nationally in December compared to the previous year. This is a slowdown from the double-digit hikes during the pandemic, but still places rents roughly 20% higher than in 2020.

Zoom in: The disparity is evident across various U.S. regions. In cities like Kansas City, Indianapolis, Chicago, and Philadelphia, mid-market rents rose between 3% and 6% in December year-over-year, outpacing the growth in luxury segments.

Rising burden for renters: The share of American renters spending at least 30% of their income on rent has shot up over the past two decades and accounts for half of the renter population. Renters like Tamika Doolin near Kansas City have seen 5%+ rent increases each year. In cities like Providence, rents are up 6% YoY, making it increasingly difficult for renters to find affordable housing.

➥ THE TAKEAWAY

Tale of two renters: The surplus of new housing in the U.S. market has led to rent cuts at the top end, giving luxury renters something to smile about. Meanwhile, middle- and lower-tier apartments enjoyed rent growth. The rising costs of leasing middle- and lower-tier apartments, projected to grow 2% nationally this year, impact the majority of U.S. renters. This growing disparity underscores the need for more affordable housing options.