What is Causing the Big Drop in Rent?

As new apartment buildings continue to come onto the market, the cost of rent continues to fall, new data from real estate data firm Redfin showed this week. 

The median U.S. asking rent fell to $1,594 in December, its lowest level since March 2022 and down 6.2% from its record high of $1,700 in August 2022. When examined by square footage, median asking rent fell 1.9% year-over-year to $1.78. The drop comes after rents soared in the last few years as demand for housing grew.

“We’re kicking off 2025 in a renter’s market, with many renters finding that apartments cost less than a year ago—especially in the Sun Belt,” said Redfin Senior Economist Sheharyar Bokhari in a prepared statement. 

Apartment Construction Driving Down Rent

A big reason for the drop was an increase in apartment building construction.

Some 58% more apartments were completed in the third quarter than at the same time last year. It was the highest level since 1974.

That sent vacancies up 8% for buildings with five or more units, the most since early 2021, the Redfin data showed.

Rents Fall the Most in Southeast, But Rising in Some Places

The drop in rent isn’t experienced evenly across the country and in some places, rent is moving higher. Austin, Texas saw the biggest drop in rents, falling 16.3% year-over-year. Rents also dropped significantly in Nashville, New York, Tampa and Jacksonville.

“Asking rents are falling most in the Sun Belt because the region has been building a lot of housing, and because in some areas, rents are coming back down to earth after rising to unsustainable levels during the pandemic moving frenzy,” the report said. 

On the flip side, rents moved higher in some areas, including a 12.6% jump in Providence, R.I., followed by Virginia Beach, Va., Louisville, Ky., Baltimore and Buffalo, N.Y.