The third quarter of every year is historically the busiest for apartment rentals, but demand fell this year, according to RealPage.

It’s the first time the rental technology platform has recorded a third-quarter drop in the 30 years it’s been tracking the metric. Demand fell by more than 82,000 units nationally, according to the report.

This came after a record number of new renters filled apartments during the first two years of the Covid pandemic. Now, household formation appears to have stalled, with more renters now moving out than moving in.

Apartment vacancies popped 1 percentage point to 4.1%, still very low due to that previous demand surge.

“Soft leasing numbers coupled with weak home sales point to low consumer confidence,” said Jay Parsons, head of economics and industry principals at RealPage. “Inflation and economic uncertainty are having a freezing effect on major housing decisions. When people are uncertain, human nature is to go into ‘wait and see’ mode.”

As a result of the slowdown in demand, asking rents, which had already been growing at a slower pace at the start of this year compared with last year, dropped in September for the first time since December 2020, down 0.2%.

Higher rents in general may be turning some potential tenants away, but the slowdown appears to be across all price points.

And current renters seem to be in a pretty good financial position overall. Household incomes among new lease signers were up 13%, year over year, through August, and rent collections improved as well, at 95.4%, up from 94.9% the year before.

“If jobs and wages continue to hold up as they have and inflation cools to some degree, we should see pent-up rental demand unlocked ahead of the spring 2023 leasing season,” Parsons said.

There’s still one red flag for investors in apartment stocks, though: Apartment construction is now at a 40-year high. Apartment REITs were already getting hammered by higher interest rates, and more supply in the face of falling demand is not a good mix.

Completions of roughly 917,000 new units are on track to peak in the second half of next year — the majority at the higher rent tiers.

“Peak rent growth is clearly in the rearview mirror,” said Carl Whitaker, senior director of research and analysis at RealPage. “That’s true coast to coast. And with apartment supply set to start increasing, it’s unlikely we’ll see rents reaccelerate even as demand returns.”