According to property broker Redfin, the median US asking rent fell 0.8% year-over-year in December to $1,964. That’s the third consecutive decline, following a 2.1% annual drop in November 2023 - which was the largest since 2020 - and a 0.3% dip in October. December rents were little changed from the prior month (-0.2%).

The rental market has lost steam largely due to a jump in supply fuelled by a building boom in recent years. That has left many landlords struggling to fill vacancies, motivating some of them to drop asking rents. Some landlords are also offering one-time concessions like a free month's rent or reduced parking costs to attract renters. This means the prices renters are paying in total are likely coming down faster than they appear to be in the data.

Other reasons rents have cooled include economic uncertainty, slowing household formation, and affordability challenges, as rents are still only 4.4% below their record high. Additionally, there are new signs that the economy is slowing; Americans are starting to tighten their belts, which could be contributing to the decline in rents.

“High supply is driving rent declines. But if mortgage rates continue to drop at a fast clip in 2024, slowing rental demand could become a major driver of rent declines,” said Redfin economics research lead Chen Zhao. “That’s because more Americans would ditch the rental market to become homeowners, leaving landlords with even more vacancies.”