Will Falling Rents Cause Minneapolis Duplex Values to Follow?

All real estate is local.

Having said that, Redfin‘s recently released data on the US. rental market is worth paying attention to. Nationwide, the median asking rent declined 2.1% from last November to this and now stands at $1,967. It was the biggest drop since February 2020.

Redfin maintains this is all the result of two factors: increased supply of apartments, and economic uncertainty.

According to Rentcafe,  1.2 million new apartment units were created in the United States in the last three years, with another 460,860 scheduled to be completed by the end of the month. By the end of 2025, there are another 1 million units scheduled for completion.

With more inventory available for renters to choose from, many housing providers are finding themselves struggling to fill vacancies. As a result, many end up lowering rent or offering concessions like free Internet or one month free.

A secondary cause of falling rents is economic uncertainty. People are reluctant to form new households when they aren’t confident about the immediate future. Moreover, rents are still 22.1% higher nationwide than they were in November of 2019.

Redfin predicts, however, that the demand and price for large rentals will continue to rise in 2024. There just aren’t as many single-family homes or large apartments to rent. Post Covid, remote work, or a hybrid schedule, have served to increase demand for bigger units that can accommodate home office.

Ironically, the median asking rent throughout the Midwest rose 4.6% over last year. In the other four major U.S. regions, rents fell year over year. Of course, rents in the Midwest are typically more affordable than the rest of the nation, meaning they have the biggest room for growth.

While this all may seem far removed from the day-to-day realities of being a Twin Cities landlord, it’s important to remember we own investment properties. Their value is determined in large part by the amount of revenue they generate, and profit they produce.