Supply and demand in action in the market for apartments

Some Big U.S. Cities See Apartment Rents Fall for First Time in Years
by: Laura Kusisto
Oct 05, 2016
Click here to view the full article on WSJ.com

TOPICS: Supply and Demand

SUMMARY: Apartment rents declined in some of the country's priciest cities during the third quarter, a dramatic reversal that could signal the end of a six-year boom for the U.S. rental market.

CLASSROOM APPLICATION: Students can evaluate the effect of an increase in the supply of apartments and a decrease in job growth, which causes a decrease in demand, on apartment rents. The article also notes a "hold-up problem": Landlords typically drive a harder bargain on renewals because they know residents would rather avoid the hassle of moving.

QUESTIONS: 
1. (Introductory) What is the effect of an increase in the supply of apartments on rents?

2. (Advanced) What is the effect of a slowdown in job growth on rents?

3. (Advanced) Why do landlords typically drive a harder bargain on apartment lease renewals?

Reviewed By: James Dearden, Lehigh University