Studio Goldmines and Three-Bedroom Busts: Following the Money in Rentals | Real Estate Market Update w/ Martin Perdomo

The rental market has reached a pivotal turning point that smart investors can't afford to ignore. After more than two years of stagnant or declining rents, we're witnessing the biggest year-over-year jump in apartment rents in two and a half years. At $1,790, the median asking rent has climbed 1.7% since last July – and this is just the beginning of what could be a significant upward trajectory.

What's behind this shift? A perfect storm of economic factors. Homeownership remains financially out of reach for many Americans, pushing more people into rentals. Simultaneously, multifamily construction has hit the brakes – permits are down 23% nationally since the pandemic building boom. This supply-demand imbalance is handing power back to landlords after years of tenant-favorable conditions.

The geographic patterns tell an equally compelling story. San Jose leads with an astounding 8.8% rent increase while its building permits plummeted 74%. Chicago, Washington DC, Pittsburgh, and Philadelphia all saw rent jumps exceeding 7.5%. Meanwhile, markets like Jacksonville and Austin, where construction continues aggressively, are experiencing rent decreases. Perhaps most revealing is the unit size data: studios and one-bedrooms are up 3.4%, while three-plus bedroom units fell 1.5% – clear evidence of changing demographic preferences as younger generations delay family formation.

For multifamily investors, these signals demand action. With Gen Z (larger than the Boomer generation) entering prime renting age and construction slowing, we're heading toward an even more severe housing shortage in the next 2-3 years. Don't let higher interest rates keep you on the sidelines – you can refinance later, but the opportunity to secure properties before this supply crunch fully materializes won't wait. Follow me on Instagram and Facebook @EliteStrategist for the unfiltered strategies we're implementing behind the scenes to capitalize on these market shifts. Be strategic, be early, be elite.

Chapters

• 0:00 Market Update Introduction
• 1:28 Rising Rents and Supply Shortage
• 3:20 City-by-City Rent Analysis
• 6:06 Unit Size Impact on Rental Growth
• 7:55 Strategic Recommendations and Closing

Transcript

Speaker 1: 0:01

Welcome back to this week's Real Estate Market Update, where we break down what's really happening with prices, buyers and strategy. Later in the episode, I'll tell you how to stay plugged into the moves we're making behind the scenes so you can move fast, fund smart and scale in today's market. According to a brand new data from Redfin, us apartment rents just posted their biggest year-over-year jump in two and a half years. Rents are rising, supplies is tightening and if you own, or plan to own, mid-to-large multifamily units, this episode is for you. Let's get into it. The median asking rent for US apartment is $1,790 in July, up 1.7% year over year. That's a $30 jump and it's the largest increase since January of 2023. This marks the second consecutive month in positive growth after more than two years of flat or falling rents, and while we're still below the peak rent level we saw in July of 2022, momentum is clearly shifting and is favoring landlords again.

Speaker 1: 1:29

Finally, so what's driving this? It's all about supply and demand. On one side, demand is rising. The cost of home ownership is still high and more people are choosing or being forced to rent. On the other side, multifamily construction has also slowed way down. Permits to build new apartment units are down 23% nationally since the pandemic building boom. That means less new supply is coming to market and landlords are regaining the leverage. Redfin's senior economist said it best Rents are sluggish in the past two years because of oversupply created during the pandemic. Now that construction is slowing, the power is shifting back to the landlord. That's a key point and for those of us holding multifamily assets or looking to get into the game, this is the signal we've been watching for. Now. Very, very, very important here to point out. We see multifamily permits down, which means that in two, three years we're going to have a what again? A housing shortage supply that's even bigger than the one we have now. Gen Z generation is bigger than the boomers generation. Gen Z needs a place to live and now, with the slowdown of new building and new apartments, that's going to create a problem which is going to create scarcity in the market, which is, with demand coming to market, that's going to increase rents even more.

Speaker 1: 3:14

So if you're an investor and you're on the sideline because interest rates are high, stop it with that. Get out there and buy deals, make sure they cash flow, even with higher interest rates. You can refinance later, okay, but if you sideline. For those of you that have been sidelining, you're going to watch us, the pros, eat your lunch. So if you want to eat with me, make sure you go out there and buy.

Speaker 1: 3:43

San Jose, california bye, san jose. California just posted the largest rent increase in the nation in the nation, up 8.8 percent year over year, with a median asking rents hitting 3569 dollars. Holy crap, that's a mortgage. That's insane. Chicago came in close behind at 8.6%, followed by Washington DC at 8.5% and Pittsburgh and Philly Pittsburgh at 7.7% and Philly at 7.5%.

Speaker 1: 4:14

And it's no coincidence that these cities also saw a massive drop in new construction permits. Look at the direct correlation guys. Direct correlation New construction permits down, prices up. In San Jose, for example, building permits have fallen 74% since the pandemic. That kind of supply freeze drives prices fast when demand stays strong. On the flip side, rents are still falling in places where supply is coming online faster.

Speaker 1: 4:47

Jacksonville, florida unfortunately, my state saw the biggest decline down 33.5% year-over-year. Austin declined. My friends, I have some friends in Austin. My girl Tamar. I know you're a big investor in there. Shout out to you, my girl Tamar. Louisville, cincinnati, phoenix and Cleveland also saw slight drops. These metros have continued to permit aggressively. In fact, austin permitted more than 63 multifamily units per 10 000 people over the past year, second highest in the nation.

Speaker 1: 5:26

It's just simple math, guys. Simple math a lot of supply right over supply in the market drops prices. Less supply in the market. Higher demand increases prices. It's just simple math, guys. This is the old supply and demand thing. It's the basic, fundamental stuff. So, again, this is a supply story. In overbuilt markets, rents are soft. In undersupplied markets, they're heating up Investors who know the difference. That's where the edge is Now.

Speaker 1: 6:06

Here's something especially relevant if you're managing or acquiring apartment complexes. Studio and one-bedroom rents are up 3.4% year-over-year, the strongest growth since 2022. Two-bedroom rents climbed 1.7%, but three-plus-bedroom units actually fell 1.5%. This data just makes sense because if you study migration patterns and if you study which I do, if you're an investor, you should be watching this stuff and you study population growth remember America's population is actually slowing down, so people are waiting longer to have family. So if Gen Z and millennials are waiting longer to have family and to have children, that means that these bigger spaces, like the three and four bedrooms, are going to have less demand. This tells us renters' demand is highest for smaller apartments, more affordable units If your portfolio skews towards compact, high-density layouts. If you're considering value-add conversions, that's where the yield is growing. To my partner, javi, if you're listening or you're watching, right on the money baby, we're taking those units and we're turning them into a bunch of one bedrooms and studios. So the data points that that's where the puck is going.

Speaker 1: 7:33

So what do you do with all of this? If you're in planning or getting into multifamily, especially midsize apartments or larger, here's what matters Review your unit mix and adjust your rent strategy accordingly. In high-demand metros with shrinking supply, consider pushing rents more aggressively in Q3 and in Q4. In oversupplied markets like Austin or Jacksonville, focus on retention and renewals, sweeten the lease terms, keep occupancy stable and ride out the flood. That is exactly what we're doing up down south with our down south asset. It's exact strategy. If you're acquiring, lean into metros where permits are down and demand is stable. That's where long-term equity and cash flow converge. And remember concessions are like free parking and reduced rents were common all over the past two years, but they're drying up rápido fast. If you're negotiating leases now, you may have more room to shift terms in your favor If you want to keep getting the unfiltered truth on this market the numbers, the funding strategies and the exact place we are running behind the scenes.

Speaker 1: 8:55

Follow me on Instagram and Facebook. Just search at Elite Strategist and if this episode helped you get clear on your next move, share it with another investor who needs to hear this information. That's your Wealthy AF market pulse. Be strategic, be early, be elite. Catch you next week. Peace out.