After years of double-digit rent increases, owners are vying to fill new buildings by offering a month free, gift cards and other perks
When firms make above normal profits in the short-run (P > ATC), we expect that in the long-run more firms will enter or more capital will be brought in (in the absence of barriers to entry). This means that the supply line or supply curve will shift to the right, bringing prices back down. The reference to new buildings indicates this is going on. More capital is entering the industry, indicating that a long-run change is taking place. So this seems to be an example of supply and demand working according to the textbook theory.
Excerpts from the article:
"After suffering through a three-year period when rents jumped by 30% or more in many U.S. cities, renters are now starting to enjoy small breaks like this. Rents still aren’t falling by much. But thanks largely to an unusual surge in new building supply, more landlords are offering other enticements to fill up their properties, from a month of free rent to a reduction in fees and deposits.
Some are getting more creative. In suburban Atlanta, landlords renting houses are pledging free lawn care or housekeeping services. Tenants at certain buildings in Chicago can spin a wheel and win gift cards to local businesses.
Concessions have been especially prevalent in the most overbuilt Sunbelt markets, but they are on the rise in the majority of major metro areas. About one-third of apartment and home-rental listings this October included some type of markdown, according to an analysis of rental listings by real-estate firm Zillow. This was the highest rate since February 2021, Zillow said.
Property-data firm CoStar Group, meanwhile, found three times more apartment-rental buildings offered concessions this October than did so during the same month two years ago."
"The effective rents of one-bedroom units in professionally managed, high-rise buildings in Chicago’s West Loop neighborhood were 14% lower at the end of November compared with that month last year due to concessions"
Related posts on supply and demand:
Orange Juice Prices Are at Record Highs—and Could Keep Climbing (2023)
Apartment Rents Fall as Crush of New Supply Hits Market (2023)
Egg Prices Surge to Records as Bird Flu Hits Poultry Flocks (2022)
How Supply And Demand Have Affected Beef Prices Recently (2017)Is There A Booze Shortage? (2022)
Car makers face ‘chipageddon’ (2021)
Does the U.S. have a firefighter shortage (2021)
There is no truck driver shortage in the US (2021)
Is there a shortage of homes? (2020)
Why honey prices have climbed about 25% since 2013 (2019-This post is featured in Introduction to Microeconomics by Luís Cabral. He is chair of the economics department at New York University.)
Is there really a shortage of construction workers (2019)
Was there really a shortage of meatless burgers? (2019)
Is There A Christmas Tree Shortage? (2017)
Is There Really A Honey Bee Shortage? (2013)
Will There Be A Pumpkin Shortage This Year? (2011)
Introduction to Microeconomics by Luís Cabral
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