With the end of summer comes the peak of the rental market, as young people fan out all over the country, looking to begin new chapters of their lives. Conventional wisdom dictates that rents are significantly lower in winter months (since fewer people tend to move then, especially in the colder climes.) That would mean that a thrifty renter ought to wait until winter to move to save hundreds of dollars a month in rent. Right?
Don’t get too excited! It turns out that apartment rents tend not to vary all that much between peak and low seasons. In major urban markets like New York City, LA, Chicago, Phoenix, Philadelphia, San Diego and Charlotte, rents only tend to rise and fall about 4% between the high- and low-seasons. On a $2,000/month apartment, that’s only an $80 swing. (According to studies here and here). However, from the landlord’s point of view, a 4% change in rent is substantial as it means a 4% change in their rental revenue.In highly seasonal markets like Miami, the swing is more like 6% between the highs and lows. Atlanta shows some of the biggest variability, with swings of up to 8%.
In most markets across the country, rents are generally higher during the summer months and lower in the months leading to winter, when units tend to linger on the market and landlords are more willing to negotiate. Discounts are least likely in April and May, and most likely in October, marking the beginning and end of the busy season.
According to Streeteasy, in New York City (this country’s largest rental market), the biggest discounting period begins in September and lasts through November. In October, landlords offer deep discounts to try to clear out leftover inventory before the winter doldrums hit. By May, rents start to tick back up again.
Why does all of this matter?
For decades, the hotel industry has been using sophisticated revenue management techniques to price hotel room inventory, resulting in huge revenue gains for hotel owners and investors. Today, sophisticated apartment management companies utilize similar revenue management software to price inventory, to the point that they can pinpoint how to price rentals by month--or even day of the week or time of day. These incremental rent increases can result in sizable increases to property income and value. At Compound, we use data in all forms to make the best real estate investment and management decisions. Seasonality is just one of the many data points we use to optimize portfolio performance.