Rental Trends in 2024

North Pointe Villas, La Habra, CA

California’s relatively high living costs continue to be a trending topic of conversation. The median cost of a home in Orange County recently hit $1.2 million (Redfin), while surrounding counties are similarly and notably expensive when compared to other parts of the country (Wolfinger). As such, competition to find an apartment remains very steep. While 2024 has so far offered a relatively stable rental market, the question remains: What does the future look like for apartment renting and how can we expect things to shift going forward? 

Competition and Occupancy

Nationally, occupancy has been on a gradual downward trend for the past two years, until just recently (RealPage). As of April 2024, there has been a small but sure bounce back in occupancy levels. These numbers are determined by a variety of factors such as available inventory, the volume of residents moving out of state, and more. According to studies found by industry leaders such as CoStar and RealPage, the current stabilization of occupancy nationwide can be attributed to a collision of high supply and high demand. The current demand for apartments is some of the highest since 2021 (Gundersheim, et al)  while new-build constructions are reaching numbers not seen in nearly 40 years (RealPage). The narrowed the gap between supply and demand has created a moment of stabilization for occupancy levels. More recently, September saw the first drop in vacancy rates in the past 3 years. Apartments.com attributes this to a persistent demand for apartments meeting a deceleration of new build construction (Pirulis). If this trend persists, renters can expect even higher competition in their search for a new unit.

At the outset of the year, RentCafe warned that the renter market would be competitive across the board (Grecu). Standing at the midpoint of the year, their prediction would appear to be accurate. Renters nationwide find themselves locked in a struggle with one another to obtain the housing of their preference: California renters are experiencing especially steep competition due to a higher ratio of residents who rent versus own, just barely lower than that of New York (McGhee). Home to several vast metropolises, it’s no wonder that Californians face such challenges within the rental market. RentCafe did a study of all counties in the United States to determine where the highest ‘competition’ was (based on 5 separate metrics): California occupies 4 of the top 20 spots, with Orange County and East Los Angeles County landing in the top 10. The report shows that between San Diego, East LA County, and Orange County, on average, an estimated 10 to 14 new renters compete with one another for a single available unit for rent. Renters seeking a new apartment in Orange County face the additional challenge of competing with high rates of current residents who choose to renew their lease rather than move out (Grecu).

Rent Prices

With competition and demand at such high levels, it also follows that rent prices will remain high. Rent prices are affected at any given time by a number of factors. Currently, rent prices nationally have been elevated and exacerbated by a combination of higher interest rates on mortgage loans, property insurance rates having doubled and tripled due to increased natural disaster occurrences, national housing shortages, skyrocketing costs to maintain and operate properties, lingering effects of the pandemic, and ever shifting legislation (Robertson).

In Southern California, a brief increase of vacancies fueled by new construction coming online and certain generations shifting towards home ownership versus renting has increased the supply of available rental units and given renters a moment to catch their breath. With millennials currently transitioning from renters to homeowners, Gen Z is now taking their place as the dominant renters. Because of their smaller size, the new generation of renters is having a small but notable impact on rent prices. In LA specifically, these factors have certainly served to reduce the growth rate of market rents slightly. However, it is unlikely that we will see any drastic changes soon to the rental markets in this area (Khouri). In light of the drastic increases in apartment market rates over the past few decades, this decrease is considerably negligible. 

Overall, rent prices continue to increase steadily, making the slight lull in rent growth this year an anticipated small speed bump in the ever-expanding rental market. Southern California alone has seen rents almost double since the turn of the millennium (Gundersheim). Furthermore, much of the most remarkable growth has happened extremely recently. In the last few years, national rent prices have jumped another 30% over the prices that we saw before the outbreak of COVID-19 (Helhoski and NerdWallet). This increase has proven to be an incredibly difficult financial challenge for some Californians to meet. The Golden State houses the highest percentage of renters earning over $100,000, with 30% of all renters in California earning $100k or higher. Even so, California takes the bronze medal for residents experiencing ‘rental stress’ in the nation - surprisingly, renters in FLorida and Louisiana experience a higher rate of “rental stress” which is defined as a rent to income percentage greater than 30% (McGhee et al). 

While 2024 looks to be a uniquely stable year with growth in occupancy and rent growth temporarily stalled, this lull is not expected to signal a new normal. In the following years, we can expect a beckoning of gradually climbing prices and steeper competition. 

Sources:

Contributor, Analytics. “Apartment Occupancy Ticks Up for the First Time Since Early 2022.” RealPage Blog, RealPage, Inc., 3 May 2024, www.realpage.com/analytics/april-2024-data-update/.

Grecu, Veronica. “America’s Hottest Rental Markets at the Start of 2024.” Market Insights, RentCafe, 12 Mar. 2024, www.rentcafe.com/blog/rental-market/rental-competitiveness-index/us-hottest-rental-markets-start-of-2024.

Grecu, Veronica. “Chicago, Silicon Valley Challenge Miami as Hottest Rental Markets.” Market Insights, RentCafe, 18 June 2024, www.rentcafe.com/blog/rental-market/market-snapshots/us-hottest-rental-markets/.

Gundersheim, Jesse, et al. “Orange County Leads US Apartment Rent Growth Heading Into 2024.” CoStar Insight, CoStar, 11 Jan. 2024, product.costar.com/home/news/962082042.

Gundersheim, Jesse. “Southern California Home Price Surge Outpaces Rent Growth.” Costar News, CoStar, 6 Mar. 2024, product.costar.com/home/news/1558568825.

Helhoski, Anna, and NerdWallet. “Will Rents Drop in 2024?” KTLA, Nexstar Media Inc., 9 Mar. 2024, ktla.com/news/nationworld/will-rents-drop-in-2024/.

Khouri, Andrew, et al. “Housing Tracker: Socal Home Prices Continue to Break Records.” Los Angeles Times, Los Angeles Times, 21 Sept. 2023, www.latimes.com/california/story/2023-09-21/tracking-home-and-rent-prices-in-southern-california.

McGhee, Eric, et al. “California’s Renters.” Public Policy Institute of California, Public Policy Institute of California, 27 Feb. 2024, www.ppic.org/blog/californias-renters/.

“Orange County, CA Housing Market: House Prices & Trends.” Redfin, Redfin Corporation, www.redfin.com/county/332/CA/Orange-County/housing-market. Accessed 26 Aug. 2024.

Pirulis, Alecia. “Apartments.Com Rent Report for September 2024: What’s behind the Declining Vacancy Rate?” Apartments.Com Renterverse, Costar Group, Inc., 11 Oct. 2024, www.apartments.com/blog/apartments.com-national-rent-trends-report. 

Robertson, Aaron. “Why Rents Are Climbing Higher: A Look at California’s Market.” Why Rents Are Climbing Higher: A Look at California’s Market, Authority Property Management, Inc., 8 May 2024, www.authoritypm.com/understanding-why-rents-are-climbing-higher-a-closer-look-at-california-s-market.

Wolfinger, Matt. “Migration Trends Report: Where Are People Moving in 2024?” ConsumerAffairs, Consumers Unified, LLC , 20 May 2024, www.consumeraffairs.com/movers/states-people-are-moving-to-and-from.html.