Rent is dropping, but renters still pay $300 more per month than before the pandemic

Asking rents dipped just 0.4% year-over-year in June, but before you get too excited, the median asking rent is still $305 higher than the same time in 2019 before the pandemic, according to Realtor.com’s June 2024 Rental Report. The median asking rent in June was $1,743.

While there’s been a slight year-over-year decline in rent, prices have actually been increasing month-over-month, which experts say is typical of spring homebuying or home-renting season. The main factor driving year-over-year rent declines, however, is actually an oversupply in certain markets. While the U.S. is short roughly 4.5 million housing units, according to Zillow, there’s still an oversupply of apartments in some markets. That’s because the apartments that started being constructed during the pandemic are finally coming to fruition. 

“The situations in these markets reflect the economic rules of supply and demand,” Brian Zrimsek, industry principal at property technology firm MRI Software, tells Fortune. “Properties where construction started during the pandemic are now coming online, increasing inventory and putting downward pressure on price.” That’s made it surprisingly difficult for some property owners to find tenants, with less than half (just 47%) of new apartments completed at the end of 2022 being rented within three months, according to Redfin.

The drop in rent prices isn’t all that great

The drop in asking-rent prices isn’t anything to call home about, however. Rent was only $11 less in June than it was in May, according to Realtor.com. “New renters will get better deals, but the decreases probably equate to the costs of a few Starbucks trips,” Zrimsek says. 

Still, Erin Sykes, chief economist and real-estate wealth adviser at Nest Seekers International, sees a drop in rent prices as a “realignment of supply and demand for rental.”

“Most landlords own at a low price and interest rate, so pulling back on rent will not negatively affect them as most will continue to be very profitable,” Sykes tells Fortune. “Renters, on the other hand, may start to have more options and thus be more motivated to make a move than when prices were at their peak.”

Greg Clement, CEO of real-estate software company Realeflow, has a different view. Charging lower rents could hurt the bottom line for some landlords, but he says it’s still “great news” for renters. 

“Lower rents mean they make less money, which might lead to less maintenance and fewer upgrades on properties,” Clement tells Fortune. “Landlords might need to get creative to attract and keep tenants, maybe by offering better amenities or services.”

That scenario has been particularly evident in luxury apartments, where landlords and property-management companies are offering extravagant amenities and services like onsite IV hydration drips and spa treatments. It’s all part of the “amenities arms race” to attract and retain residents while rental competition remains high for landlords and property-management companies in some housing markets.

What rents are doing in major markets

Rent rates have “definitely dropped, but it’s a mixed bag depending on where you look,” Clement says.

In June, the markets with the most significant year-over-year declines were all in the south, including Austin, Texas (a 9.5% decrease), San Antonio, Texas (-8.2%), and Nashville (-8.1%), according to Realtor.com, which says this downward trend is “unsurprising” considering the increase in new rental units. 

However, midwest markets showed the most rental price growth. Indianapolis saw a 4.4% jump and Milwaukee and Minneapolis asking rents were up 3.7%. Coastal markets showed mixed results, with Los Angeles asking rents down almost 3%, but New York City rents up 0.6%. 

“Some big cities have seen noticeable reductions, while other areas, especially in the suburbs and countryside, might not feel the same impact,” Clement says. “Overall, though, rents are trending downwards, which is a big shift from the constant hikes we’ve seen over the last few years.”

However, it’s still important to note the U.S. is still “chronically undersupplied, and buying a home is far beyond the means of many people, who are renters by necessity,” Zrimsek says. “This is an ongoing macroeconomic problem that the multifamily industry faces.”