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Market Reporting that Matters

Strong Apartment Markets get Stronger; Lower-Performing Markets Lower

Sacramento Still No. 1

Tuesday, October 11, 2016

Many metro-area apartment markets with the highest annual effective rent growth recorded increases in September 2016, while larger markets with negative growth fell further into the red. 

The ultimate result was that national rent growth continued its downward slope, ending September at 2.6%, the lowest rate since July 2010. September’s rate was 0.31 percentage points below August’s 2.9% and 2.59 percentage points below the 5.2% of September 2015. 

Annual effective rent growth has decreased each of the past six months, but remains above the long-term average of 2.2%. Slowing job growth throughout the nation, combined with the continued construction boom in many metros create the foundation for rent-growth moderation. 

And the supply situation is somewhat in flux, as construction labor shortages force delays in deliveries. Whereas 2016 had long been thought to be the peak year for new supply in this cycle, these delays now have more units identified for delivery in 2017. 

The High and the Low

The three markets – among the Axiometrics top 50, based on number of units – with the highest annual effective rent growth had higher rates in September 2016 than in both August 2016 and September 2015. And while year-over-year figures were down in six of the top 10 markets, the month-over-month numbers were up or flat in six of the 10 – including four of the top five.

Heading down the list, the Bay Area markets of San Francisco and San Jose continued their decline, with their negative rent growth falling below Houston’s, which itself recorded decreased rent growth. And the third Bay Area market, Oakland, fell into the red in September. 

Again, rankings are among the Axiometrics top 50, based on number of units.

New York was the only other top 50 market to experience negative rent growth in September, at -0.3%, just a tick below August’s -0.2%. Hartford emerged back into positive territory after four months below water, with 1.4% rent growth, compared to August’s -0.8%. 

Occupancy and Year-to-Date Rent Growth

 National occupancy remained relatively steady – and high. September’s 95.1% occupancy rate was 0.09 percentage points behind August’s 95.2% and 0.26 percentage points below the 95.3% of September 2015.

September marked the seventh straight month and 14thmonth out of past 18 in which occupancy has been above 95.0%.

Meanwhile year-to-date (YTD) rent growth began its usual late-year descent, falling 0.24 percentage points. The YTD rate has decreased each September since 2012.

September’s YTD performance placed the rate 0.91 percentage points below the post-recession September average of 5.0%.


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


Memphis Surges onto Top-Performers List

Until July 2016, the Memphis apartment market hadn’t recorded annual effective rent growth above 4.0% in five years. But its continued strengthening – combined with decreases in other top markets – has landed the Western Tennessee city among the elite crowd in September, ranking No. 12 in rent growth among the Axiometrics top 50, based on number of units.

Its rent growth even topped in-state rival Nashville.

As mentioned early in this newsletter, Sacramento and Riverside had the highest rent growth again, though Salt Lake City moved to No. 3. Seattle dropped from third last month to seventh in September.

Charlotte fell off the chart, dropping from No. 16 to No. 21.


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