Axiometrics: Apartment Rent Growth Slips

Apartment rent growth slipped to 3.1 percent but remained above the long-term average in July, reported Axiometrics, Dallas.

July represented the smallest national annual effective rent growth figure since February 2014, said Axiometrics Content Manager Dave Sorter. But he noted that rent growth remains above its 2.2 percent 1997-2015 average. Apartment rent growth peaked at 5.2 percent in July 2015, he said.

“[We] expect the market to stabilize by the end of 2016,” Sorter said. He forecast 3.2 percent rent growth as the year closes. 

Axiometrics Real Estate Analyst Louis Rosenthal noted that the U.S. homeownership rate recently fell to 62.9 percent, a five-decade low. “The homeownership rate is exactly where it was in the first quarter of 1965, when The Sound of Music was on cinema screens and Downtown by Petula Clark was at the top of the charts,” he said. 

The Census Bureau reported that the national homeownership rate peaked at 69.2 percent in 2005. It averaged 64.8 percent throughout the 1990s.

“The extent of the drop-off in the homeownership rate cannot be over-dramatized,” Rosenthal said. “Meanwhile, the rental vacancy rate, which includes all forms of rental housing, including single-family homes, duplexes and triplexes among others, fell to its lowest level since the fourth quarter of 1985.” 

Sorter said strong occupancy is one sign that the national apartment market remains in good shape. July’s 95.1 percent occupancy figure remained above 95 percent–which Axiometrics considers full occupancy because some units will be unoccupied at any given time due to move-outs and repairs–for the fifth straight month. 

“Even though the rate of homeownership has cratered since the onset of the Great Recession, other economic factors, including household formation, job growth and the rental vacancy rate suggest a housing market not quite as gloomy as the headline numbers suggest,” Rosenthal said. “Home sales are up in many markets, though prices continue to make single-family homes unaffordable to many people. The higher-end homes being built are bought by the people who can afford them. But apartment rent growth continues to be above the long-term average, and absorption of the new supply seems to be strong.”