Zillow: Rents to Flatten in 2016
Apartment rent appreciation should level off over the next 12 months, slowing to an annual rate of 1.1 percent by December, said Zillow, Seattle.
“Hot markets are still going to be hot in 2016, but rents won’t rise as quickly as they have been,” said Zillow Chief Economist Svenja Gudell. “The slowdown in rental appreciation will provide some relief for renters who’ve been seeing their rents rise dramatically every single year for the past few years.”
Zillow projected that its rent index will reach $1,396 by at the end of 2016 compared to $1,381 last month.
Annual effective rent growth slipped to 4.3 percent nationally in December from November’s 4.6 percent, said Stephanie McCleskey, Vice President of Research with Axiometrics, Dallas.
“The moderation by no means translates into a weak market,” McCleskey said, noting that December’s rent increase rate more than doubled the 20-year long-term average. “With transactions of apartment properties in 2015 valued at a record $150 billion-plus, investors are still quite bullish on apartments, even though double-digit rent growth in some metros may not be seen for a couple of years.”
Gudell said Zillow expects rental appreciation to slow down most significantly in Nashville, Tenn., San Francisco, Portland, Ore. and Denver. For example, San Francisco rents grew 12.5 percent in 2015, but growth could fall to 5.9 percent this year, she said.
Even with the slowdown, renters will struggle in many of the major markets, especially on the West Coast, Gudell said, noting that San Francisco and Los Angeles renters can expect to spend 40 percent of their income on a rental payment. “Rents are still rising and renters are struggling to keep up,” she said.
Zillow said the rental appreciation slowdown indicates that supply of new multifamily homes is catching up to demand as “substantial” new housing supply comes online in Atlanta, Denver, Portland, Seattle and other markets.
