The US rental market is shifting, with asking rents dropping in 28 out of 44 major metro areas in May. This is the highest number of metros with falling rents since September 2023, according to real estate brokerage Redfin. The national median asking rent fell 1 percent from the previous year, down to $1,633. Although the drop seems small, it marks a significant change that could point to a broader real estate trend where either home prices or interest rates may need to come down.
Where Rents Are Dropping the Most
Austin, Texas, had the largest drop in rents among the 44 metros that Redfin analyzed. In Austin, the median asking rent fell 8.8 percent to $1,385 in May, reaching the lowest level since February 2021. That’s $414 below Austin’s record high set in August 2023. Rents also fell significantly in Minneapolis, Columbus, Nashville, and Portland.
In Minneapolis, for example, asking rents dropped by 6.3 percent compared to a year ago. In Columbus, Ohio, the decline was 3.5 percent, while Nashville and Portland both saw 3.4 percent drops. Nicole Stewart, a Redfin Premier real estate agent in Boise, Idaho, noted that in many cities, “People are finding rentals that are nicer than the house they could afford at the same monthly cost. That’s in part because a lot of home sellers are overpricing their properties as they struggle to adjust to the changing housing market.”
Why Are Rents Falling?
One major reason for falling rents is a surge in apartment construction that started after the pandemic began. Sheharyar Bokhari, Redfin’s senior economist, explained, “Apartment construction in America has been hovering near a 50-year high, and even though renter demand is strong, it’s not keeping pace with supply.” Many new apartments are sitting vacant for months. Bokhari said, “Many units are sitting vacant for months, which means renters have power to negotiate concessions and landlords have less leeway to keep rents high.”
In fact, less than half of newly built apartments are being rented out within three months. This is one of the lowest shares on record. In Austin alone, there were permits to build 64.5 multifamily units for every 10,000 people in the past year, more than any other metro Redfin analyzed. Columbus and Nashville also ranked high for new apartment construction.
Record Highs in Other Metros
While rents fell in most metros, some places still saw record highs. Cincinnati had the largest rent increase of 7.4 percent year over year. In Chicago, Memphis, and Washington, D.C., rents also hit new highs. The median asking rent in Washington, D.C., rose to $2,104, an increase of 2.4 percent. Memphis saw a similar 1.9 percent rise to $1,274. In Chicago, the median rent reached $1,781.
Redfin’s data shows that most of the metros with rising rents have not been permitting as much new apartment construction as the national average. This limited supply helps support higher prices.
Sellers Outnumber Buyers: A Warning Sign?
The changes in the rental market are happening at the same time as a shift in the for-sale housing market. According to Redfin, home sellers outnumber buyers by nearly 500,000 as of April. There were about 1.9 million home sellers and only 1.5 million active buyers. That’s the largest gap Redfin has ever tracked since 2013. Just a year ago, the gap was only 6.5 percent.
This gap started growing in November 2023 when mortgage rates soared to nearly 8 percent. While rates have fallen slightly since then, they still sit around 6.89 percent, which is too high for many would-be buyers.
Asad Khan, Redfin’s senior economist, said, “The balance of power in the U.S. housing market has shifted toward buyers, but a lot of sellers have yet to see or accept the writing on the wall.” Some sellers are still holding on to high prices, even as more homes stay on the market longer.
Affordability Remains a Challenge
Even though rents have started to fall in many places, they remain high compared to what most people earn. Zillow reported in May that the typical renter now needs to make over $80,000 a year to afford a standard rental. That’s a big jump from five years ago when it was just $60,000. In some big cities, renters need to make six figures just to afford the median rent.
Since 2020, rent for a typical apartment has risen 28.7 percent, while rents for single-family homes have gone up by 42.9 percent. In contrast, median household incomes have only risen by 22.5 percent in that time. This means more people are paying a larger share of their income on rent.
Emily McDonald, a rental trends expert at Zillow, noted, “Knowing when demand spikes can help renters plan ahead, act quickly, and use smart tools to find a place that checks all their boxes without blowing their budget.” She added that Zillow usually sees a jump in rental activity during the first week of June.
What Could Happen Next?
Experts believe that the current gap between buyers and sellers could eventually lead to falling home prices. Chen Zhao, head of economic research at Redfin, said, “Generally, the ratio of sellers to buyers seems to be a predictor for home price growth, but with a lag of about three to six months.” Redfin expects that home prices could drop about 1 percent by the end of this year. While that’s a small drop, it’s a big change from the rapid price growth seen in recent years.
However, Zhao cautioned that larger drops in home prices are not likely unless sellers are forced to sell. She said, “It’s actually very hard for home prices to fall, unless sellers have to sell.”
Renters and Buyers Have More Leverage
For renters, the current market shift means they have more power to negotiate with landlords. Dieter Holger, a data reporter at ConsumerAffairs, wrote, “Asking rent prices are falling in 28 of 44 major U.S. metropolitan areas as of May, the most urban areas since Sept. 2023, according to Redfin. Many rentals are left vacant for months following a surge in apartment construction, which is giving renters negotiating power.”
For home buyers, the growing number of sellers could lead to better deals in the coming months. Some sellers have already started offering concessions, like paying for buyers’ closing costs or dropping prices outright, something that wasn’t common just a couple of years ago.
The fall in rents and the increase in homes for sale signal that the housing market may be heading for a bigger change. Some experts see this as a healthy correction that could make homes more affordable for first-time buyers and renters. Others warn that if the market slows down too much, it could drag on the economy.
