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Major City Apartment Rent Trends Affect National Performance

New York, San Francisco Rent Growth Negative

By Dave Sorter | Wednesday, August 10, 2016

National annual effective rent growth remained nicely above the long-term average in July 2016, though continued slides in the San Francisco Bay Area, New York and Houston affected apartment rent trends, driving the national rate down to 3.1%. 

The July rate was the lowest since the 2.8% of February 2014, just before performance began to rise toward its 5.2% peak in July 2015. The most recent rate was 2.04 percentage points lower than the high point of one year ago, and .34 of a percentage point below June’s 3.5%.

Though July was the ninth month of the last 10 that national annual effective rent growth has decreased, Axiometrics expects the market to stabilize by the end of 2016, when rent growth is forecasted to be 3.2%. Rent growth remains above the long-term (1997-2015) average of 2.2%.

A separation is beginning to take place among large markets that are experiencing weak performance and smaller markets still showing robust strength. Some 20 markets among Axiometrics’ top 50 metros, based on number of units, recorded rent growth of 4.0% or higher in July. The issue is that none of them are what are commonly referred to as “primary markets,” such as New York, San Francisco and Los Angeles.

Seattle, Phoenix, Atlanta, Dallas-Fort Worth and Tampa St.-Petersburg are among the larger markets with the highest rent growth, but these are often considered “secondary markets,” though Seattle is considered a primary market in some circles. Markets referred to as “tertiary,” such as Sacramento, Riverside, Salt Lake City, Las Vegas and Nashville, make up the bulk of the top-markets list.

Meanwhile, some primary markets went negative, as the combined effects of slowing job growth and increased supply took their toll.

  • Houston’s -2.2% annual effective rent growth in July marked the fourth straight month the metro was below zero.
  • San Francisco apartments fell 1.21 percentage points to -0.7%, the first time the market was negative since April 2010.
  • New York apartments’ -0.2% annual effective rent growth in July was the first time it was in negative territory since January 2014.
  • San Jose and Philadelphia were still positive in July, but with 0.3% and 0.4% rent growth, respectively, a dip below zero is possible.

Occupancy and Year-to-Date Rent Growth

One sign that the national apartment market remains in good shape is that occupancy continues to be strong. While July’s 95.1% occupancy represented a small decrease from the 95.2% of both July 2015 and June 2016, it remained above 95.0% -- the rate at which Axiometrics considers a property or market full – for the fifth straight month and the 12th month of the past 16.

Looking at past years, August seems to be the peak occupancy month, so next month’s report will be interesting to see.

On the other hand, the pace of year-to-date (YTD) rent growth slowed in July, inching up 0.19 percentage points to 4.1%, the third-lowest July result since the end of the Great Recession. The latest rate was 0.4 percentage points below the post-recession July average of 4.6%.

YTD rent growth had been at or near the post-recession (since 2010) average for the first half of the year, but July’s numbers brought some separation.

The chart below depicts the post-recession July YTD performance.

West, South Continue Metro Dominance

The West and the South regions have housed the apartment markets with the highest annual effective rent growth for quite some time. That’s still the case, as 16 of the top 17 rent-growth metros among Axiometrics’ top 50 for July are located south of Interstate 40, west of Interstate 15 – or both.

Sacramento had the highest metro rent growth for the fifth straight month by a wide margin – 5.12 percentage points over Riverside, CA, which moved from third to second in the July rankings. Seattle fell from second to third, trailing Riverside by 0.08 of a percentage point.

Portland, OR, which held the No. 1 spot for seven months through February 2016, fell out of the top 17 into 19th place. Its replacement: Warren, MI, the suburban part of the rapidly strengthening Detroit area. Detroit itself is not among the Axiometrics top 50, but if it was, its 6.2% rent growth would rank sixth on the list.

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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