Apartment Rents Are Still Skyrocketing
January 8, 2016
Apartment rents surged 4.6 percent in 2015, posting the largest gain since before the Great Recession. It’s a good time to be a landlord, but not a renter, according to the latest report out by Reis, a real estate research firm.
Apartment rents nationwide now average nearly $1,180, which is up from $1,125 a year ago, Reis reports.
The fourth quarter “wrapped up an incredible year for the apartment market, probably the strongest we’ve ever seen,” says Jay Denton, senior vice president of analytics at Axiometrics Inc., an apartment research company that also released a report showing rents rose 4.7 percent in the fourth quarter compared with the same quarter a year earlier.
For the past six years, rents have been on the rise. Increases have ranged from 2.3 percent in 2010 to about 4 percent in the last two years.
The higher rents edge up, the more difficult it proves for young adults to save enough to become home owners. The number of first-time home buyers in the real estate market, as such, has dipped to a three-decade low, according to the National Association of REALTORS®.
The apartment market may be showing some signs of peaking, however, as a greater supply of apartment buildings hit the market. Vacancy rates edged up slightly in the fourth quarter to 4.4 percent compared to 4.3 percent in the previous quarter.
The increase in competition is causing landlords to limit the amount that they can raise prices, says Bob DeWitt, president and chief executive of GID, a Boston-based apartment owner and developer.
“We certainly believe that over the next two or three years rent trends are going to slow and in some places they may actually back up,” he told The Wall Street Journal.
Some hot apartment markets are already showing signs of slowing. For example, rents in the San Francisco area rose 7.6 percent year-over-year in the fourth quarter, compared with 11.8 percent in the third quarter, according to Axiometrics. Also, rents in San Jose, Calif. rose 7.1 percent compared with 9.9 percent in the third quarter.
Source: “U.S. Apartment Rents Rose the Most Last Year Since Recession, Survey Says,” The Wall Street Journal (Jan. 6, 2016)
Updated: July 13, 2018