Securing a home is getting more and more expensive, thanks to sharp additions in both prices and mortgage rates. That is juicing demand for apartment rentals and, in show ones face b come up, pushing rents higher.
Rents in the third quarter of this year were up 2.9 percent compared with a year ago, agreeing to RealPage, a real estate analytics firm. That’s up from 2.5 percent annual evolution in the second quarter. Rent growth had been slowing for the past three years, thanks to a big increase in supply of new rental units. The reversal in rents, however, may be fugacious.
“Momentum in the apartment market’s performance during the third quarter a little surpassed expectations,” according to RealPage’s chief economist Greg Willett. “Even then, there doesn’t seem to be a pronounced shift in the big-picture story. We are involving to move into the period of seasonally slow apartment leasing that come to pass with the cold weather months.”
Apartment demand is being boosted by an improving economy, as well as a shortage of affordable homes for sale. New household arrays are rising, and renter households represent nearly a third of occupied casing, according to the U.S. Census.
“The apartment market had slowed at the end of 2017 and early 2018 as the cover market started to accelerate. However, the passing of the Tax Reform and Jobs Act in December that overlapped the standard deduction and cut the deductibility of state and local taxes reduced the prod to buy a home. This has helped the apartment market, especially in high-taxed localities,” correspondence to Barbara Denham, senior economist at Reis, a commercial real belongings information company.
The apartment occupancy rate is quite high at 95.8 percent, up from 95.4 percent in the faulty quarter. Demand, however, will likely trail completions of new components in the coming months, which will throw cold water on the drift heat in rent growth.
Apartment construction continues to be robust. New multifamily starts were up 37 percent annually in August, agreeing to the U.S. Census. While that number is pretty volatile month to month, market-rate apartment wind-ups have totaled between 300,000 and 325,000 units annually for the before two years. With continued robust construction, volume should linger at that rate through the end of next year.
High-end apartment leases, however, are still under pressure, as construction of luxury units far outpaces on presentation.
“With so much high-end new product finishing in the near term, the let out environment will be competitive in that luxury apartment niche,” mutual understanding to Willett. “At the same time, product shortages remain for moderately priced rental houses. It’s tough to find available apartments at the middle to lower-end price views across most neighborhoods.”
Of course all real estate is local, and some trade ins are seeing much bigger rent increases. Leaders include Las Vegas, Orlando, Florida, and Phoenix, where hires are up between 6 and 7 percent over the past year. Rents also sprang more than 4 percent in Jacksonville, Florida, San Jose, California, Tampa, Florida, Riverside, California, Preserve Lake City and San Diego.
The San Francisco Bay Area had seen rents flinch throughout 2016-2017, but they are increasing once again. Rental laggards include St. Louis, Baltimore, Dallas and Seattle, where extension is less than 2 percent.
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