2017 Closes with ‘Moderate’ Apartment Rent Growth

Apartment rents climbed at a “moderate” 2.5 percent pace in 2017, reported RealPage, Dallas.

Nationally, monthly apartment rents reached $1,330 at year-end, RealPage Chief Economist Greg Willett said.

“While the apartment rent growth pace has slowed from the performance seen a couple years ago, it’s the longevity of the current cycle that’s so impressive,” Willett said. “Rents have climbed substantially for eight consecutive years.”

Effective rents for new leases slipped 0.9 percent during the fourth quarter, Willett said, noting slight rent cuts late in the year reflect normal seasonality, “as slower leasing activity in the colder-weather months can spur housing owners and operators to offer more pricing deals.”

Victor Calanog, Chief Economist and Senior Vice President with Reis, New York, noted the rent growth rate reflects a “deceleration” in apartment market fundamentals compared to recent years, partly due to new supply coming online.

“The number of metros seeing higher vacancy rates and effective rent declines reflects the boom in construction,” Calanog said. “Job growth was positive in 2017. Continued positive job growth in 2018 should maintain a steady demand for new apartments, while any further increases in vacancy and/or decreases in effective rent will likely reflect continued increases in new supply.”

National apartment occupancy held steady at 95.1 percent at year-end, unchanged from a year before, RealPage said. While year-end occupancy inched down 20 basis points from the third quarter, the decline was less than the normal seasonal drop–generally 50 basis points–that occurs when leasing activity slows as the temperature cools.

“That smaller-than-typical seasonal occupancy drop reflected market tightening in a handful of locations where hurricane damage sent displaced households to the apartment stock,” Willett said. He noted occupancy jumped 140 basis points on a quarterly basis in the big Houston metro and 220 basis points in the smaller Corpus Christi, Texas market. Many Florida metros have received households leaving Puerto Rico after Hurricane Maria tended to register small occupancy increases in the fourth quarter.

Willett said the national apartment market remains tight, with product availability generally limited to recently completed properties moving through initial leasing. “Unless a renter can afford that expensive new stock, finding a ready-to-lease unit takes some real work in most locations.”