Rents skyrocketed in 2014 and many analysts did not think those escalating costs would be sustainable. But they have yet to slow in 2015 – and in fact, rents have gotten higher — and the increases likely will continue into next year.
Annual rent growth in September was 5.2 percent – the highest since 2011, according to Axiometrics, an apartment research firm. That also marks the eighth consecutive month the rate has been 5 percent or higher. A year ago, annual rent growth was 4.1 percent.
The eight months the rate has been above 5 percent is the longest sustained period of strength we have seen, The last growth cycle was only four years, and this cycle is already five years long — with no sign of stopping.”
Apartment construction has been increasing to meet rising demand, but some say it’s still falling far too short.
New inventory coming to market is weighted to the high end; it’s urban, Class A, with a rich set of amenities, targeting the coveted college-educated millennial
In September, apartment vacancies were low – at 95.3 percent occupied nationally. Axiometrics considers anything above 95 percent as a “full” market.
But weak income growth may not support rent growths much longer in some markets.
Some studies are showing that it is more affordable to buy a home than rent. But inventory constraints in the for-sale market – particularly on the lower end – can keep renters renting, as well as the inability to save for a down payment due to the high rental costs.
Lately, rent gains are highest in cities with boom tech sectors, such as in Seattle, Denver, and Portland, Ore. Rental prices are also above average in Nashville, Tenn., Charlotte. N.C., and several cities in Florida, Axiometrics reports.
David Crowe, chief economist for the National Association of Home Builders stated “Younger, newly formed households continue to move out of their parents’ or roommate living arrangements and rent an apartment, driving up the demand for more rental units,”
Homebuilders Lennar and Toll Brothers are adding more rental apartments to their mix.