Episode summary
Jay Parsons on changes in the rental market
HousingWire Daily
· · 26 min · Hosts: Sarah Wheeler · Guests: Jay Parsons
Summary
Jay Parsons argued that the rental market is being misunderstood if it is viewed mainly through the lens of homeownership affordability. He said the biggest force in apartments and single-family rentals over the last three to four years has been a historic wave of supply, not just rising mortgage rates, and that strong demand has still been overwhelmed by new units. That has pushed vacancies higher and rent growth lower, while also improving affordability through better rent-to-income ratios.
Parsons said supply is now rolling over after peaking in 2024 and 2025, with total construction roughly half of what it was at the high point. Even so, he said vacancies remain slightly to moderately above normal, which should keep rent growth limited. He also said concessions are at their highest level since 2010-2011 and are acting more like a marketing tool than a true demand driver.
On the market-by-market side, Parsons said the strongest rent growth is concentrated in lower-supplied markets, including San Francisco and parts of the Midwest, while Austin and many Florida tertiary markets are still weak but improving as supply cools. He also said REITs are seeing better-than-expected expense trends across the board, and he expects the Fed to hold rates in September, though he called that guess low-confidence.
Key takeaways
- Jay Parsons said the rental market’s main story is supply, not just mortgage-rate pressure, with the largest rental supply wave in more than 40 years still working through the system.
- Parsons said vacancies have started improving since March, but they are still above normal enough to keep rent growth constrained.
- Parsons said concessions are now the highest since 2010-2011 and are increasingly a marketing tactic, not a meaningful demand stimulant.
- Parsons said San Francisco is one of the hottest rent-growth markets because demand has recovered faster than new supply can return.
- Parsons said the Midwest has been a winner because it is chronically under-supplied, with more housing units aging out than being replaced.
- Parsons said he expects the Fed to hold rates in September, while warning that CPI rent data lags real-time market rents.
Notable quotes
“we had about I think it was three straight years of vacancy increases. And now this year, especially since the leasing season season started around March, we have seen incremental vacancy improvement”
“the concessions are the highest they've been since coming out of the great financial crisis in 2010, 2011”
“I think you have to look at the what we call the effective rent, which is the asking rent minus the offered concession”
“the Midwest has been the clear winner from this”
How the episode opens
Welcome everyone. My guest today is rental economist Jay Parsons of Jay Parsons Research and host of the Rent Roll podcast to talk about the rental side of the housing market and where he's seeing changes in rental vacancies and in rent growth. Before we dive in, here are the top five stories on housingwire.com.
First we have UWM faces class action lawsuit over hedge strategy followed by mortgage rates fall again, but are borrowers stretching budgets too far? Then we have Remax CEO Eric Carlson to step down after Real acquisition closes and I and B's lift profits in Q2 as costs fall and volumes rise. Finally, we have Logan's latest on why we don't have a housing shortage.
Okay, we are ready to dive in. Jay, welcome to the podcast.
Thanks for having me, Sarah.
Oh, I'm so excited to have you. You know, we we spend a lot of time talking about the housing market in general, but really focused on single-family. So excited to have uh, you know, someone who's an expert in the rental market and single-family rentals and multi-family.
So that's what I want to start out with is like can you give us a high-level view of the rental market? I think the narrative over the last few years is that you know, it's been tough. Rising rates affects the whole housing market rents included, but is that an outdated view?
What's what's changing and what would you characterize that market as right now?
Well, yeah, first and foremost there, thank you for asking that because you know, one of my pet peeves, the reason I love what I do and focus on rental rental market is because I think so much analysis around the rental housing market is viewed through the lens of home ownership and home buyers and obviously, you know, we're two-thirds nation home buyer.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- rental market
- rental vacancies
- rent growth
- mortgage rates
- housing market
Watch the episode
Watch “Jay Parsons on changes in the rental market” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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