Apartment Rent Growth Slows Further
U.S. apartment rents are climbing at just a 2.3 percent annual pace at mid-year, the slowest rate in eight years, reported RealPage, Richardson, Texas.
Some of the country’s biggest markets are registering largely flat rents, up less than 1 percent from a year ago, RealPage Chief Economist Greg Willett said, noting Seattle and Dallas are among the metros where rent growth slowed most dramatically during 2018. Seattle apartment rents are up only 0.5 percent and Dallas rents have increased just 0.8 percent since second-quarter 2017.
“If [apartment owners] miss the window to drive rents during the second quarter, it’s tough to counter that shortfall later in the year,” Willett said. “Even though demand generally holds up through late summer, by August or September there’s a tendency to position rents more conservatively in order to fill as many units as possible before the seasonal slowdown in leasing begins.”
Following typical seasonal patterns, most of the past year’s rent growth occurred in April, May and June. Pricing increased 1.8 percent during that three-month period compared to a 2.3 percent average between 2014 and 2017, Willett said.
A few big metros continue to register “robust” apartment rent growth, Willett said. The annual pace of rent increase reached 6.6 percent in Orlando and 5.8 percent in Las Vegas and apartment rents are up between 4 percent and 5 percent in Jacksonville, Fla., Phoenix, Houston and Tampa, Fla.
RealPage said new apartment supply–almost all of it high-end–is being delivered at levels last seen three decades ago. “Rent concessions, often about a month of free rent, now are common in neighborhoods adding the most new product,” the report said. “While new properties are too expensive for a majority of renters to afford them, rent growth also is slowing to a lesser degree in existing projects of more moderate quality.”
Developers completed more than 75,000 market-rate apartments in the 150 largest U.S. metros during the second quarter, Willett said. The annual pace of completions now has exceeded 300,000 units for four consecutive quarters.
“We’re at best only halfway through the period of peak deliveries,” Willett said. He said he expects annual deliveries to stay near 300,000 units per year through the middle of 2019.
With total demand spread among so many new properties, the leasing competition experienced by those individual properties can mask the fact that apartment leasing in aggregate remains very strong, the report said. Occupancy in the U.S. apartment sector remains healthy, with a 95.0 percent occupancy rate at mid-year. Even though many deliveries have come online recently, occupancy barely budged from the 95.3 percent level recorded a year ago.
