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2017 Forecast: Rent Growth to Match Long-Term Average

Performance will Strengthen in 2018 and 2019

By Dave Sorter | Friday, April 7, 2017


In the face of moderating job growth…despite the massive amount of supply identified for delivery in 2017…even though several large metros are expected to remain in negative rent-growth territory…Axiometrics apartment market data is resulting in a forecast that shows annual effective rent growth in 2017 matching the long-term average.

The latest forecast estimates average rent growth of 2.3% this year, equaling the average rate from 1995-2016 and actually 10 basis points (bps) higher than the previous forecast’s estimate. This slight increase also comes in the wake of a predicted fall in the job-growth rate to 1.4%, with 2.01 million jobs added to the workforce in 2017.


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With the slowing job-growth rate and with 404,761 new units identified for 2017 delivery, as of April 3, 2017, average rent growth remaining at the long-term average is a testament to the overall health of the national apartment market. While primary markets such as the San Francisco Bay Area, Houston and New York are expected to average flat to negative rent growth this year, strong smaller markets are taking up some of the slack, according to Axiometrics apartment data.

The scatterplot chart below depicts how the apartment market has changed in the past year. The green dots indicate markets in which the forecasted 2017 rent growth increased from the prediction of one year earlier; the red dots indicate metros where the forecast has been lowered. Except for Los Angeles, Atlanta and Seattle, the “green” metros are secondary markets that have shown a great deal of strength since the start of 2016 – such as Sacramento; Riverside, CA; Warren, MI; and Minneapolis-St. Paul.

Most of the primary markets are “red” – New York; Boston; Philadelphia; Washington, DC; Chicago; South Florida; Houston; and the Bay Area among them. As the chart shows, the largest positive change was 170 bps (in Sacramento), while the biggest negative change was 460 bps (San Jose). San Francisco, Oakland, Houston, Baltimore and New York also dropped by more than 200 bps.


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In terms of the actual forecasted rent growth for Axiometrics’ top 120 markets, based on number of units and other factors, the biggest changes between forecasts came at either end of the scale. The previous forecast estimated that only two metros would achieve average rent growth of 4.0% or higher this year, only one market would be negative and 10 would range from 0-2%. The other 107 would gather in the 2-4% area.

The latest forecast, however, reduced that 2-4% cluster to 80 markets, still two-thirds of the total group. Some 14 markets are now expected to exceed 4.0% rent growth, while a total of 26 metros would fall below 2.0%, including six in negative territory.

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As mentioned earlier, supply is a major factor in predicting how the nation and a market will perform, though not to the same extent as job growth. The 400,000-plus units identified for 2017 delivery represent the peak for the current apartment cycle, but the pace of construction won’t really start slowing down until the third quarter of 2018. 

Axiometrics forecasts 319,541 units to come to market in 2018, and 295,521 in 2019. The supply levels are expected to tick up slightly in 2020 and 2021, but nowhere near the peaks of 2016 and 2017.

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Other predictions for 2017 and beyond, based on Axiometrics’ latest forecast and apartment market research, include: 

  • While average effective rent growth will hit a recent low of 2.3% this year, it is expected to rise to 3.2% in 2018 and 4.1% in 2019 before moderating back to 3.2% in 2020 and 2.6% in 2021.
  • Job growth also will increase in 2018 and 2019, to 1.7% and 2.0%, respectively. Like rent growth, this metric is expected to retrench to 1.7% in 2020 and 1.4% in 2021.
  • Occupancy is expected to average 94.6% in 2017, rising to 94.8% in 2018 and 95.2% in 2019, exceeding the magical 95% at which a market is considered full. That rate is predicted to fall to 95.0% in 2020 and 94.7% in 2021.
  • The total number of building permits issued is forecast to rise to 1.4 million this year, but fall to 1.3 million in 2018 and 1.2 million in 2019. This includes all housing, both single-family and multifamily.


Dave Sorter

Dave Sorter


Dave Sorter is an award-winning journalist who spent 30 years as a newspaper reporter and editor before joining Axiometrics. He oversees all Axio blogs and newsletters and serves as senior editor of all Axio publications.

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