Apartment Rent Growth Stable; Occupancy Remains Tight
U.S. apartments saw flat rent growth in September but moderate third-quarter growth, said RealPage, Richardson, Texas, and Yardi Matrix, Santa Barbara, Calif.
Effective rents for new leases climbed 0.9 percent during the quarter, RealPage Chief Economist Greg Willett said. Annual rent growth has remained between 2.5 and 3 percent this year, down considerably from recent years as new product completions started in force arriving in 2016.
“Today’s rent growth pace is roughly in line with the long-term norm,” Willett said. “Consumers should feel more comfortable with rental housing price jumps similar to typical wage growth, after several years when rents rose faster than incomes.”
Willett noted monthly apartment rents across the country’s 100 largest metros now equals $1,316.
Rents have grown 2.6 percent this year, Yardi Matrix reported. “While that’s a solid increase, it falls short of the sector’s stellar performance in recent years,” the firm’s Matrix Monthly Rent Survey said. Rents rose 3.4 percent through three quarters in 2016, 4.9 percent in 2015 and 4.0 percent in 2014. “Rent growth tends to slow down in the fourth quarter, when fewer people move, so if things hold to form, gains for the year could be already baked in.”
Yardi Matrix said which direction rents will go depends on several factors including the economy, new deliveries and in some metros the impact of the recent major hurricanes. It noted the economy continues to create 150,000 to 200,000 jobs per month, a positive demand driver. Meanwhile, deliveries are starting to slow as developers find it harder to find qualified workers. The National Federation of Independent Businesses said one-third of construction firms called labor quality their biggest problem in August. Nearly 90 percent of respondents said they found it hard to fill some jobs.
“The labor shortage is expected to worsen in some areas as workers migrate to Houston and Florida to assist in the efforts to rebuild after Hurricanes Harvey and Irma,” Yardi Matrix said. “Upwards of 50,000 multifamily units suffered damage in Houston, where the multifamily market should get a boost as displaced households find a temporary spot to relocate.”
Apartment occupancy in the top 100 metros fell slightly to a still-healthy 95.5 percent in the third quarter, said Jay Denton, Vice President with Axiometrics, Dallas. “Occupancy normally peaks in the third quarter and then falls off a bit due to seasonally slow leasing at the end of the year,” he said. “We have some concern about how much occupancy could deteriorate during the next few months, given big blocks of new supply are set for delivery during the seasonal leasing lull.”
