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Surprising Markets Help Boost Apartment Market Performance

Rent Growth Rises to 2.3%

By Dave Sorter | Thursday, March 9, 2017

 

Sparked by a wave of significant increases in numerous markets – including boosts in some surprising metros – national annual effective rent growth increased to 2.3% in February to begin 2017 on a positive trend.

February’s figure represented a 10-basis-point (bps) increase from January’s 2.2%, but was 181 bps lower than the 4.1% of February 2016. Average effective rent increased $8 to $1,285, the second straight month that the average has risen.


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Of course, the positive February movement does not mean that the moderating apartment market is out of the woods yet. It is still the lowest post-recession February number since 2010.

Markets large and small impacted the increase, with 28 of the Axiometrics Top 120 metros, based on number of units and other factors, showing rent-growth increases of more than 50 bps from January. Some 13 of those markets are among the 50 most major metros.

The biggest gainer among the major markets was Hartford, which was in negative territory as recently as August 2016. The Connecticut capital’s February rent growth of 3.5% was 257 bps above January’s 1.0% and 569 bps above its recent low of -2.1% in July 2016.

Another recent East Coast surprise has been Nassau County-Suffolk County, which achieved a rent-growth increase of 89 bps to 4.3% in February and broke into the top 10 of major metros.

Meanwhile, Birmingham, San Jose and New York escaped negative rent-growth territory with increases of 144, 108 and 95 bps, respectively. San Francisco, though still negative, surged closer to even with a 113-bps rent growth rise.

The top gainers among Axiometrics’ Top 50 Markets in February were:


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Among smaller markets, oil-dependent Odessa still has the lowest effective rent growth among the Axio Top 120 at -7.0% as the energy industry is still reeling from lowered oil prices. However, February’s rate was a 394-bps increase from January’s -10.9% and 1,976 bps higher than the -29.8% of February 2016 – the low for this cycle. Smaller Southern metros such as Naples, FL; Montgomery, AL; Columbus, GA; Tallahassee, FL; and North Port, FL also achieved rent-growth increases of more than 100 bps from January to February.

 

Occupancy Reverses Course

The national occupancy rate increased by 6 bps to 94.5% in February, snapping a five-month streak of declines. February’s rate was, however, 27 bps lower than the 94.7% of February 2016.

The increase was to be expected, as occupancy has risen each February since the Great Recession ended.


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Year-to-date (YTD) effective rent growth increased 52 bps to 0.8% in February, below the post-recession peak but ahead of the time frame’s low years of 2013 and 2016. February’s YTD rate fell 7 bps shy of the post-recession average.


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The highest recovery-era February YTD rent growth was recorded in 2011, while the lowest was in 2016.


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Sacramento Marks a Year at No. 1

Sacramento’s professional basketball team may have lost its top player, DeMarcus “Boogie” Cousins, in a trade, but California’s capital has retained its position as the King of Apartment Markets. 

For the 12th straight month, Sacramento reported the highest annual effective rent growth among the Axio top 50 markets, based on number of units. However, growth decreased in February to 9.0% from 9.5% in January.

While Riverside remained at No. 2, Fort Worth supplanted Las Vegas for the No. 3 spot, and San Diego jumped to No. 5 from No. 14. On the Eastern Seaboard, Nassau County-Suffolk County (Long Island) advanced to No. 10 from No. 17 and Hartford, as discussed above, has rebounded from negative rent growth last August to No. 15 on the chart.

Jacksonville returned to the chart, while Warren, MI and Tampa fell off.


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Dave Sorter

Dave Sorter

Journalist

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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