- US apartment prices are near all-time highs before the busy moving season begins.
- Consumers are bracing for higher inflation this year, and they may be right.
- A real-estate veteran shared why rent may reach record highs in the coming months.
Renters who are thinking about moving this year may want to strike before they’re priced out.
Although apartment prices have drifted downward in recent months, there’s reason to suspect that they’ll accelerate to record highs during the bustling spring and summer seasons.
A one-bedroom unit in the 100 largest US cities went for $1,524 in March, according to a recent report from real-estate site Zumper. That’s almost identical to February when it was $1,525, and the median cost of a two-bedroom setup was unchanged at $1,905.
However, each of those rent figures is up considerably from this time last year. One-bedroom places are 2.5% more expensive, while two-bedroom fixtures are up 3.1% versus last March.
Rent is rising alongside inflation expectations. Consumers surveyed in March were anxious and said they thought prices would increase 6.2% in the next 12 months, up from 5.8% last month, according to The Conference Board's new consumer confidence report.
As rental demand picks up in the warmer weather, real-estate analysts say rent could surge.
"It feels like the calm before the storm," Zumper CEO Anthemos Georgiades said in the report.
Record rent may kick-start inflation
In many parts of the US, the metaphorical tempest is already in full force.
Apartments got more expensive in 59 of the 100 cities tracked by Zumper, including 17 markets where prices rose at a double-digit rate. Units in major metropolitan areas are right around record highs, even during a seasonally quiet stretch.
San Francisco apartments soared 10.3% to $3,200 — its highest mark in nearly five years. And New York City units rose 6.4% from last March to within $30 of their all-time high, Zumper noted.
Jonathan Miller, the cofounder of New York-based real-estate firm Miller Samuel, recently said his research shows that median rents in the Big Apple have never been higher. Apartment costs steadily rose from October through February — long after the peak season of July and August.
Unless there's a recession, which some economists say is increasingly a risk, this may continue.
"If a record was set in February before the market really gets going — barring any change in the state of the economy — we could very well see new records being set quite a few more times this year," Miller told Business Insider.
Although that observation is primarily about the New York market, Miller said it could apply to the rest of the US as well, with the possible exception of the supply-dense Sun Belt region.
Apartment inventory soared to a 50-year high last summer, especially in warmer areas that became popular during the pandemic. But these supply increases may have gone too far, Miller said, as rents are now tumbling in places like North Carolina and Texas.
"Within the Sun Belt, it seems very unlikely because of overbuilding and oversupply," Miller said of rent records. "Outside of the Sun Belt, there's definitely potential for record or near-record prices, but it's really a local phenomenon."
The rental market is prone to the boom-bust cycle that commodities experience, so if apartment supply rises too much and brings down prices in the Sun Belt, builders will pull back. Indeed, Zumper noted that construction permits for new multi-family units are plunging right now.
In the meantime, renters may have plenty of options in the Sun Belt, but apartment availability elsewhere may be more limited. Limited supply combined with lofty mortgage rates, which take home purchases off the table for many, mean that people may contend with higher rent prices.
"We're looking at weaker economic conditions in 2025 generally, but not a recession," Miller said. "And I just think that, even with a weak economy, there's still a potential for higher prices."
More expensive apartments could fuel inflation, and vice versa. Zumper researchers noted that the shelter component of the consumer price index lags their firm's monthly rental data, which could mean that the consumers expecting inflation to reaccelerate may be right.
"The continued rise in annual rent growth across the national rent index signals potential inflationary challenges for the Federal Reserve as it considers future rate cuts," the note read.