Apartment demand unexpectedly fell during its busiest season, according to a new report

According to RealPage, the third quarter of every year is the busiest for apartment rentals, but demand has fallen this year.

For the first time in 30 years, the rental technology platform recorded a third-quarter decline. The demand decreased by more than 82,000 units.

The first two years of the Covid epidemic saw a record number of new renters fill apartments. Household formation seems to have stopped, with more people moving out than moving in.

The apartment vacancies are still very low because of the demand surge.

The head of economics and industry principals at RealPage said that weak home sales point to low consumer confidence. Major housing decisions are being affected by inflation and uncertainty. Human nature is to wait and see when there is uncertainty.

Asking rents fell in September for the first time in over a year, as a result of the slowing demand, which had already been growing at a slower pace at the start of the year.

Some potential tenants may be turned away by higher rents, but the slowdown appears to be across all prices.

Current renters seem to be in good financial shape. Household incomes among new lease signers were up 13%, year over year, through August, and rent collections improved as well.

"If jobs and wages hold up as they have and inflation cools to some degree, we should see pent-up rental demand unlocked."

The red flag for apartment investors is that apartment construction is at a 40-year high. More supply in the face of falling demand is not a good mix for apartment REITs.

The majority of new units will be completed in the second half of next year.

The senior director of research and analysis at RealPage stated that the peak rent growth is over. It's true coast to coast. It is unlikely that rents will increase even as demand increases.