WHY IS RENT GROWTH DECELERATING AND WHAT’S NEXT? The supply/demand imbalance experienced since the end of 2021 has pushed the national vacancy rate up over 200 basis points from an all-time low of 4.7% in the third quarter of 2021 to 6.8% today.
roommate, while economic uncertainty continues to hold back household formation, which is dampening middle market demand. The second quarter has shown improved demand in the neighborhood of 100,000 units but will once again not match new units coming online. Thus, CoStar's current forecast pegs the national vacancy rate to finish this year in the mid 7% range, which would be 100 basis points higher than pre- pandemic levels.
Absorption in the first quarter was well below the five-year pre-pandemic average of 82,000, as higher costs due to elevated inflation weighed on demand. Moreover, significant rent increases in 2021 and 2022 forced some renter households to find alternative housing situations, such as returning home to their parents or finding a
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