'More than I expected to pay': Rents are rising at the fastest rate in over a year

Persistent inflation across everything from restaurant meals to medical care is eating into Americans' spending power. In a new blow, rents are starting to pick up again too.

Last month, the US median asking rent rose 2.3% to nearly $2,000 a month, the biggest annual jump in over a year, according to Zillow. Higher single-family home rents were behind much of that gain, but apartment rents are on the rise too as an apartment building boom that helped rents stay flat or even fall in recent years begins to fade.

For now, the pace of rent growth remains below broader inflation and typical wage gains, and many apartment buildings are still offering concessions like free months to new lessees. But the latest trends point to an environment in which landlords are gaining more power.

"Overall, it's still a good time to be a renter," said Mischa Fisher, chief economist at Zillow. "But it does look like the really, really, really good time window has been fading."

Builders rushed to put up apartments in the early 2020s, buoyed by low interest rates and shifting migration patterns in the remote work era. But the boom was short-lived. Just a few years later, rates were higher and it became clear that new supply was outpacing apartment demand.

As rents fell in cities like Nashville, Denver, and Austin, Texas, builders pulled back their new projects dramatically.

Last month, permits for multifamily construction were down 33% from July 2022.

The effects of that added supply in certain markets and stability in others are still visible. The cities where rents are now accelerating the fastest, like San Francisco, San Jose, Calif., and New York, largely sat out the recent construction wave, while some Sun Belt cities that built heavily are still seeing rents fall year over year, although not as aggressively as they had been.

"We are still in a soft market, but the directionality of things is shifting," said Rob Warnock, the lead economic researcher at Apartment List. "[The market is] now on a trajectory that's moving toward better supply-demand balance."

Nationwide, the apartment vacancy rate sits at 7.1%, a historically elevated level, but one that's beginning to tick down for the first time since 2021, according to Apartment List.

Another reason rents are ticking up? The alternative is too expensive. With mortgage rates at 6.7% and home prices hovering around all-time highs , more would-be homebuyers are renting for longer.

"More people staying in the rental market just continues to drive up demand overall," said Crystal Chen, director of communications at the rental marketplace Zumper.