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With U.S. apartment construction at four-decade highs, rents are flattening and could soon go negative, according to new report from RealPage.

Same-store effective asking rents for new leases were up 0.28% year over year in August and are on track to potentially turn negative this month. One year ago, rent growth measured 11%.

According to RealPage, in the three previous times when rents fell flat to negative—the early 2000s, 2009, and 2020—it was due to recessions hitting and demand evaporating. However, this year, demand remains healthy with a stabilizing occupancy in the mid-94% range since the start of the year, which is comparable with long-term norms.

“Rents are flattening in 2023 because the huge volume of new supply hitting the market is giving renters a lot more options—leading to more turnover among deal-shopping renters,” explained RealPage. “In turn, operators are giving on price to compete for renters and to protect occupancy and cash flow.”

Supply volumes are expected to remain high through next year, pointing to significant headwinds on rents until 2025. Less supply is expected by the second half of 2025 and into 2026 with new construction starts dropping off this year due to financing and other challenges.

Month over month, effective asking rents inched down 0.06%. This was the first month-over-month cut this year. While late summer is not typically a strong leasing month, rents usually inch up slightly in August. RealPage noted that the last time rents fell during August was in 2017.

Soft-demand West Coast markets and high-supply Sun Belt markets are seeing rents fall the hardest. According to RealPage, year-over-year rent change is negative in 24 of the nation’s 50 largest markets.

Austin, Texas, and Phoenix have seen the largest year-over-year rent changes at -4.9%, followed by Las Vegas at -4.7%. Atlanta; Jacksonville and Orlando, Florida; Nashville, Tennessee; Raleigh-Durham, North Carolina; and Salt Lake City are other high-supply markets seeing rent cuts over 2%.

On the West Coast, only California’s Orange County and San Diego remained positive as of August. RealPage found that rents fell between 1% and 3% in every other major market, led by Portland, Oregon; San Francisco; and Oakland, California.

The Midwest and Northeast, with less new supply, continue to see rent increases. The regions account for the only 10 large markets to see rents rise more than 2.5% over the last year. Northern New Jersey topped that list at 4.7%, followed by Cincinnati; Kansas City, Missouri; Boston; Chicago; Cleveland; and Milwaukee—all between 3% and 4%.

RealPage also noted that rent growth is beginning to cool in New York. This market saw the largest rent cuts in 2020, rebounding in 2021 and early 2022. As of August, asking rents were up just 1.9% year over year.