Emily Nations found a better life in April. After her Nashville-area apartment flooded for the third time earlier this spring, she began looking for a new place to live. She'd briefly thought about buying a home a few years ago, but this time, the down payment and mortgage costs were so high that she didn't even consider it. Instead, she tore up her old lease and moved into a brand new apartment just north of downtown.
“The market is crazy right now,” Nations, 31, who works in hospitality, told me. “There's no point in trying to buy.”
While not the entire house, there's a lot to love about her one-bedroom unit, including vaulted ceilings, a huge walk-in closet, and natural light streaming in through the windows. Outside her home, the chic modern farmhouse complex known as the Livano Trinity stands out, and it offers plenty of perks, including a spacious gym, a pool with a cabana for lounging on weekends, private office space, and even doggy daycare. An on-site coffee shop offers free coffee every day of your first year, and a New York-style bodega satisfies late-night hunger pangs.
The clincher for Nations was the discount she got in the deal: two months free. While she would pay $1,500 in rent most months, in May and June she paid just $95 in community fees and utilities. In the meantime, she's saving up money in case she decides to buy a home in the future.
Buying a home has never been an easy purchase, but these days the hurdles to getting one are higher than ever. Prevailing mortgage rates are hovering at 20-year highs, and the number of homes on the market remains about 30% lower than in 2019. The average sales price hit a record high of $390,613 in May, according to Redfin. In contrast, a wave of apartment construction has flooded the once-booming market, flooding it with new studio and two-bedroom units, forcing property managers to extend a compromise to lure tenants through the newly built doors. Walk into new buildings in Nashville, Salt Lake City, Atlanta and more, and you'll find rental agents peddling discounts. 8 weeks free! No fees! Free parking! Not to mention amenities like boxing gyms, rooftop pools and luxurious lounge rooms. Renters finally have some negotiating power, especially if they can afford the latest and greatest units.
While these apartments certainly aren't cheap, they may seem like a bargain when compared to the cost of buying and maintaining a home today. Household incomes have grown faster than rents over the past year, and tenants earning above the median income have benefited from more options thanks to an influx of new apartments. Given this disparity, Americans who appreciate the finer things in life and have a little extra cash to spare are increasingly choosing to rent.
In America, homeownership is synonymous with wealth. The wealthy live in a country where they pay mortgages, not rent. There's a simple logic to this setup: Homeowners enjoy property value appreciation and stability that renting doesn't. But when you consider the costs of entering the sales market and the deals that have been offered on many apartments recently, this assumption might be upended.
Landlords have always dangled concessions like rent discounts and perks in front of tenants, but the recent construction boom is benefiting tenants trying to close the deal. Low borrowing rates and high rents spurred developers to build steadily in the early days of the pandemic, with more than 1.6 million new apartments coming onto the market between 2020 and 2023, according to commercial real estate data and research firm Yardi Matrix. The firm expects another million or so to be completed in 2024 and 2025, matching levels not seen since the 1970s. Much of this construction is concentrated in the sunny, cheap places everyone dreamed of moving to during the pandemic, such as Houston, Atlanta, Austin, Phoenix and Charlotte, North Carolina. This supply boom means people in these markets aren't scrambling to grab any available space, forcing landlords to cut deals. Typical asking rents nationwide are up just 0.7% from last year, according to Yardi Matrix, and markets such as Austin, Raleigh, North Carolina, and Tampa, Fla., have seen rents fall over the past three months. About a third of rentals listed on Zillow are offering discounts, up from about 10% in 2019.
“This is a common tactic used by landlords and property managers to attract tenants,” Nicole Bashaw, a senior economist at Zillow, told me. “They say, 'Don't worry about that high rent. Look, you're getting all these great perks up front.'”
Lately, developers have been focusing on building new Class A properties, an informal classification that refers to the newest, nicest buildings and the best amenities. These units typically command rents about 30% higher than Class B and C properties. As a result, Class A properties now make up more than half of the apartment market, up from a third in the early 2000s, according to Moody's Analytics. At the same time, the number of high-income renters (those earning more than $150,000 a year) grew 82% between 2015 and 2020, according to a RentCafe analysis of Census Bureau data. Wealthy renters have more options than their middle- and lower-income counterparts.
Joel Sanders, founder and CEO of Apartment Insiders, a Nashville company that helps renters like Nations find new places to live, at no cost to them, said the city's apartment market is experiencing its biggest ever increase in supply, prompting landlords to pursue a “head in the bed” strategy that prioritizes filling units over raising rents — a good sign for his clients.
“There are people who have incomes, some making six figures, but they still value getting these deals,” Sanders told me.
Luxury apartments, with their increased amenities and lower rents, are now an attractive alternative to properties for sale. Recent changes in the housing market mean the holy grail of homeownership is increasingly feeling like a poisoned chalice. Though the number of properties for sale is growing, many sellers are reluctant to lower their prices after seeing neighboring homeowners make a killing at the market's peak. And a combination of soaring mortgage rates, rising home prices and increasing post-purchase costs like maintenance and insurance have tilted the buy-vs-rent debate heavily in favor of cutting rent checks.
“The cost of renting far exceeds the cost of owning,” Doug Ressler, business intelligence manager at Yardi Matrix, told me. “If I'm someone who's really trying to save money and doesn't want to be tied down to a home, I would consider it.”
And renters can take advantage of those savings. Sure, they may be missing out on the value of increasing home equity, but University of Cincinnati economist David Brassington previously told Business Insider that the average stock market return over the past 50 years has vastly outpaced increases in home equity (though he also noted that the stock market has been more volatile and doesn't offer a place to rest your head at night). Renters might choose to save money they would have spent on things like a new roof or mortgage interest to buy or invest in better times.
With so many new units coming up for lease at this point, apartment operators are well within their means to continue offering perks to attract new tenants and keep existing tenants from moving on to their next property. But like all good things, the golden age for wealthy American renters comes to an end. While the number of multifamily units expected to be completed next year remains robust at 459,000, according to Yardi Matrix, the end of this construction boom is beginning to be in sight. Developers are feeling the pain of rising interest rates and are wary of saturating the market with oversupply. As a result, construction is on pace to start on 245,000 units this year as of March, down from a peak of more than 600,000 in 2022, according to the Census Bureau. That means good deals for renters are expected to decline through the end of 2025 and into 2026, Ressler told me.
“The supply cliff is coming,” Ressler told me. “In other words, construction starts are already starting to slow.”
But for renters, the upside is that the cliff isn't here yet. Those in the market have more options than they did a year ago, and bargains are in the cards, especially if they're eyeing up luxury properties in cities with lots of construction cranes. So for now, the equation for well-heeled renters is simple: ride out the good times, save up whatever extra cash you don't spend on plumbing fixes and gym memberships, and then reassess your homebuying situation once the rental market warms up again.
Nations told me she still wants to buy a home one day, but the timeline her parents' generation envisioned — getting married, buying a house, having kids — no longer aligns with reality for her and many of her contemporaries, she said. Luckily, though, she had another option.
“I know how hard it is to rent a place in Nashville, especially on your own,” Nations told me, “and if you don't have a roommate or partner, it can seem so daunting and impossible. This has been a prayer answered.”
James Rodriguez I'm a senior reporter on Business Insider's Discourse team.
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