There are very serious flaws in using Apartment List or Zillow to estimate BLS price moves. But let’s discuss the current data and how it is best used. 
Please consider the Apartment List National Rent Report for August.
Our model captured an average rent decrease of -0.1% in August, and today the nationwide median rent stands at $1,412. This signals the end of the rental market’s annual busy season, as well as the second consecutive summer of modest rent growth, as the market remains sluggish thanks to a windfall of new supply. If historical trends hold, rents will continue to fall on a monthly basis for the remainder of the year.
Since the second half of 2022, the seasonal declines in rent prices that take place during the fall and winter have been steeper than usual and seasonal increases of the spring and summer have been more mild. As a result, apartments are on average slightly cheaper today than they were one year ago. Year-over-year rent growth currently stands at -0.7 percent and has now been in negative territory for over a full year. Despite this, the national median rent is still more than $200 per month higher than it was just a few years ago.
Zooming in a bit, 59 of the nation’s 100 largest cities saw rents fall in August, in line with the broader national trend. And on a year-over-year basis, rent growth is negative for 52 of these cities. Many of the steepest year-over-year declines remain concentrated in Sun Belt cities that are rapidly expanding their multifamily inventory, such as Austin (-7.5 percent year-over-year), Raleigh (-5.6 percent), and Atlanta (-4.9 percent).
Two Huge Problems vs BLS
- Apartment List Data is for new leases only.
- Apartment List Data is not seasonally adjusted.
If you are looking for a new lease in a new city, then great. Apartment list data is likely to help.
But new leases are only about 9 percent of the rental market. So using new leases as a proxy for where national rent measures are headed and how fast is nonsense.
Apartment List, OER, CPI Rent, Zori Year-Over Year
Zillow seasonally adjusts its data but it suffers from the same key issue in using new leases as a measure of national rent prices.
Amusingly, the results of Zillow and Apartment List are wildly different, yet both show upward slopes in year-over-year prices .
The BLS shows downward slopes, undoubtedly correct. BLS data is very lagging, but that is no excuse to throw in flawed measures hoping to improve the BLS lag.
For those looking for a new apartment, Apartment List appears to make sense. For example, I have no doubt that new leases in Austin, and perhaps all leases in Austin, are heading lower due to massive supply.
CPI In June
In June, the BLS reported the price of rent and owners’ equivalent rent rose 0.3 percent each. That broke a string of 33 consecutive months of each rising at least 0.4 percent month-over-month.
The largest component in the CPI is Owners’ Equivalent Rent (OER) with a weight of 26.76 percent. OER is the price homeowners would pay to rent their own home if the rented instead of owned.
Rent of Primary Residence is another 7.64 percent, and the broader Shelter category is a huge 36.32 percent of the CPI.
On August 14, I commented Consumer Price Index a Tad Better than Expected Year-Over-Year
The consensus estimate for year-over-year CPI [in July] was unchanged. I accurately called for a 0.1 percent drop but was high by 0.1 percent month-over-month.
I estimated 0.1 percent month-over-month because I expected better shelter readings than we got.
Shelter Was Hot in July
I was a bit surprised to see rent jump 0.5 percent and OER 0.4 percent in July.
Looking ahead, the next release of the Consumer Price Index (CPI) from the Bureau of Labor Statistics (BLS) is scheduled for Wednesday, September 11, 2024 at 8:30 AM Eastern Time
Given the weight of rent in the CPI, I expect big improvements on the year-over-year CPI as well.
This will be the subject of a follow-up post.
If you dig in deeper on the data apartmentlist provides you can clearly see the cause of the year over year decline. Looking at permitting activity per resident vs. rent growth it’s obvious that apartment developers seem to have a particularly strong herd mentality. They’re way overbuilding in already-saturated markets, while underbuilding in markets that are less “sexy” but where rent growth is very strong.
Not sure why this is headline news. Looking at the first chart, this price move looks like a typical seasonal pattern. Same thing happened in 2022 and 2023.
Within 2 miles of my house (in different directions) there are literally at least 1000 new or about to be completed apartments. Everywhere there is supply being built. Ditto with storage unit places and car washes. About 10 of those have gone up past 2 years within 5 miles of my house. I’m in Northwest part of Tucson. Its nuts the growth. 2BD apartments going for 2K/mo. 10 years ago it was $700. This is a pretty low wage town but it seems whatever apartments they build get filled up and whatever homes being built get bought. Non stop now for many years. Not sure how people afford it but they are!
Peppino Di Capri : Melancolie in Settembre : [1D] SPY V shape might rise to close July 16/17 gap, for a trigger, before turning down to 2022 high, or below, to 480 (Jan 2022 high), before perhaps to 430/410, between July hi and Oct 2023 lo. [30min] most activity osc on the upper half. [5min], the vertical channel : Fri Aug 30 first trigger (green,18:00 Tradingview) to the next one (red 19:10) is support. Resistance from 17:00 high. [1M] Aug #9. Red Sept ??
Existing tenants don’t know how much their landlord will charge them next time, but new lease, adjusted to market prices, indicate their price. Old leases are inelastic. New leases are more flexible and elastic. New leases are very important, just as home prices recently sold in your area. When turnover is higher, but demand is still strong, landlords are safe. During a glut new leases become more attractive, but not existing leases. Existing tenants have two options: either stay or leave. Those who move tend to move to a larger place for about the same price, or to a better and safer area. Landlord who keep existing leases below market price and treat their tenants well are more protect during the glut.
i’ve been a landlord for decades in 4 regions of usa. sold majority of my properties past 2 years. i’ve also been a tenant for half of the past 45 years. i just moved back in march from a row house as a tenant to a superior hood with a 40% decrease in my rent. the landlord at other property was greedy and not experienced. so we, the ideal tenants moved and saved greatly. the new landlord is wonderful. i follow the prices very closely on the cities where i’ve owned rentals. 3 of the 4 have downward pressure on pricing of market value. 2 to 4 family houses in desirable core hoods………smells to me like the bubble of everything is gonna burst. regular people are stretched very thin with the past 4 years of price increases on everyday costs. one property i sold in 2019 in bay area just listed for less than i bought it in 2015. that’s a decade almost. the taxes on the very desirable hood increased 50% since just 2019.
smart !
thanks
Are the Apartment list numbers asking price, or signed lease prices? There is potentially a 5% drop for signed lease vs list.
Around me in northern NJ and NY, there are a huge number of apartment complexes being built. Many look decent though some are just these massive collections of apartments. I would guess many complexes are a few months from completion. While we have population growth, I am having a hard time seeing how all these new units are going to rented at the prices they used when getting their bank loan.
My guess is that for a few years, a developer could get a bank loan on a new apartment complex easier than for other real estate projects. Since the developers also make fees on construction, they would like to see the apartments all rented, but if they don’t, they can still pocket the construction fees. This is similar to how malls in America have been built (and why we have more malls space per person in the USA than any other country). The malls where built by developers who didn’t care what happened after the mall was built. By that point, the developers had already sold LLC partnerships to every gullible doctor, lawyer, accountant, etc. By the time the mall was done, the developer already made money on construction and sold off the risk to someone else.
This explains why inflation cannot be stopped.
https://thehonestsorcerer.substack.com/p/a-mirage-of-abundance
This metric makes about as much sense of most of the components in this bogus inflation index that is not inconsistent with most government indicators.
Apartment List chart tested 2020 low, when rent deferral protected tenants from evictions. It moved up from (-)1.4% to (-)0.8%. It might breach 2020 low to a new all time low. Apt, townhouses and home prices will deflate along with rent. Millennials, zoomers and alpha will takeover those assets for halfprices.