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Market Reporting that Matters

October 2017 Market Trends

National Performance Remains on Steady Pace

Wednesday, November 8, 2017


When the final story of the 2017 national apartment market is written, the primary point will likely be that annual effective rent growth and occupancy rates have barely budged throughout the year.

From a high of 2.5% in June to a low of 2.1% in each of three months this year – including October – the growth rate has kept within a 41-basis-point (bps) range, while occupancy has remained with a 55-bps range.

October’s 2.1% annual effective rent growth was essentially the same as September’s rate, but was 44 bps lower than the 2.6% of October 2016 and 275 bps lower than the 4.9% of October 2015.



Occupancy Takes Usual October Dip

Central Austin: Less Supply, Stronger Performance

Houston Market Keeps Strengthening in Harvey's Wake


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While national rent growth was steady, many metros recorded significant swings, though Houston’s 247-bps increase, discussed below, was certainly the most dynamic shift.

Orlando, Fort Lauderdale, Silver Spring and Baltimore all saw effective rent growth increase by at least 80 bps, while Warren, MI; Long Island, Las Vegas and Columbus all fell by more than 65 bps (yet, Long Island and Las Vegas still remained among the top 10 rent-growth markets among major metros.)

A look at the top rent-growth five gainers and decliners among the major metros:


Sept. 17

Oct. 17

Change (bps)









Fort Lauderdale




Silver Spring








Warren, MI




Long Island




Las Vegas












Occupancy Takes Usual October Dip

The national occupancy rate declined by 16 bps to 94.7% in October, the lowest it has been since March, but that’s nothing new in the post-recession period. Occupancy has declined from 13-24 bps from September to October in each of the past eight years.

Last month’s rate was 13 bps lower than the 94.9% of October 2016 and 38 bps lower than the 95.1% of October 2015.

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Long Island and Minneapolis-St. Paul were in a virtual tie for the highest occupancy among major markets, each at 97.1%. (Long Island had a 2-bps advantage when extending the percentage to two decimal points.) New York was third at 96.6%, while Warren (96.3%) and Sacramento (96.2%) rounded out the top five.

Meanwhile, year-to-date (YTD) effective rent growth continued its late-year decline and remained below all other post recession years. October’s 3.3% YTD rent growth was 42 bps below September’s 3.7% and was 33 bps lower than the 3.6% recorded in October 2016 – the previous post-recession low.

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The latest rate was also 111 bps lower than the post-recession October average of 4.4%.


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Central Austin: Less Supply, Stronger Performance

One helpful tool in seeing how an apartment market has changed over time is rent growth heat maps (see below), in which individual properties are mapped, then colored according to their respective submarket’s annual rent growth.

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Comparing a map of 2015 performance and 2017 performance would look like a photo negative in most markets. Pockets of green have often changed from a forest green to a light green, yellow or even red, indicative of moderation.

A point often made by Axiometrrics, a RealPage company, is that an individual asset or portfolio’s performance often is more affected by submarket-level dynamics than market-level dynamics. That is not to say market-level characteristics are not useful (job growth, in particular, comes to mind), but local impact from new supply or large-scale corporate relocations can be immensely influential.

A case in point can be seen in Austin right now – particularly in the Central Austin submarket. Performance in the urban core is showing momentum despite a general slowdown in the metro as a whole.

Austin has been a mixed bag of results this cycle. Like many markets, Austin raced out of the gates post-recession, recording annual rent growth as high as 10.5% in July 2011 before stabilizing between 4% and 5% for the majority of 2012 through the end of 2015. That growth has been brought to a skidding halt in 2017 though, with growth as of October 2017 dropping to -1.1%.

The market’s currently weak performance is due to a combination of factors including elevated Austin apartment supply, slowing (albeit not necessarily weak) job growth and the general moderation occurring in almost every major market right now. Looking rent-growth maps from in 2015, 2016, and 2017, it becomes easier to see how the rent growth transition in Austin has manifested geographically.


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In 2015, one would be hard-pressed to find an area of town where rent growth was below 2%. By 2016, softness in the market’s central area was becoming increasingly evident, although the softness generally became less pronounced farther from the central area (particularly the Central Austin submarket).

In 2017, we see an almost perfectly inverted trend. Almost all areas of the market are experiencing negative growth (ultimately aggregating to -1.1% at the market level), Notice the Central Austin area called out with the enclosing box).

So, what would cause this area to see rent growth in the 2%-plus range while other submarkets are struggling reach positive territory?

Simply put, Central Austin apartment supply has dropped significantly this year. In 2015, some 784 units were delivered to the submarket, followed by a staggering 1,239 units in 2016. The two-year total of 2,023 units delivered was the highest total for any submarket in Austin. Given the size of the Central Austin submarket (roughly 18 square miles), Central Austin apartment supply was also the most dense among Austin submarkets.

Taking the 2,023 units in 2015 and 2016 and comparing that to the 92 units delivered in 2017, the Princess Bride’s own Vizzini would rightfully declare, ‘Inconceivable!.” It has undoubtedly helped boost the submarket’s rent growth in 2017, reaching 4.0% in October 2017 which is up from its low of -4.8% in October 2016 – a remarkable swing within a year

To further illustrate the submarket’s recent strength, compare the submarket’s current rent-growth rate of 4.0% to its annual average (a flat 0.0%) and the evidence becomes even stronger.

Austin apartment supply pullback itself is not always enough for a submarket to rebound, though, as it usually takes extraneous economic factors (particularly, market-level job growth) for performance to recover.

Job growth in Austin as of September 2017 (2.3%, or 23,500 additional jobs) may not be at its blistering 5.2% (42,700 additional jobs) pace from November 2012, but the market is still adding a healthy number of jobs.

And this is where we can link back to market-level dynamics impacting local performance, but local performance itself not existing in a vacuum.

Austin’s job growth in recent months has been solid – perhaps not great, but solid nonetheless. However, the growth has not necessarily been enough to translate to market-wide success given the deluge of new supply in 2017. But when instances such as Central Austin pop up as contrarian to the general market trend, it goes to show that there is significant value in analyzing both market-level and submarket-level trends simultaneously and within their own respective frameworks.

Stay tuned for future blog releases, where analysis regarding other prime submarkets across the nation will be featured. 

Houston Market Keeps Strengthening in Harvey's Wake 

Two months after Hurricane Harvey upended the lives of thousands of Houston-area residents, the metro’s apartment market continued to feel the impact.

Houston’s market performance has strengthened in the wake of the storm, as expected. Annual effective rent growth of 2.8% in October was, as mentioned above, 247 bps higher than September’s 0.3% -- and 606 bps stronger than the -3.3% of October 2016. Houston has quickly moved from the bottom of the rankings to No. 16 on the list of major markets.

The turnaround in performace, of course, stems from the property damage sustained suffered during Harvey: Displaced residents – both homeowners and renters – need temporary housing. On top of the impact from displacements, Houston’s job growth is expected to surge as the rebuilding effort kicks into a high gear.

While demand is projected to increase, the pace of new apartment deliveries will slow dramatically. Based on confirmed delivery schedules for individual properties, approximately 4,800 untis delivered in the third quarter, which is roughly the average of each quarter since mid-2015.

After another round of elevelated deliveries in the fourth quarter this year, Houston’s supply will drop to just 2,100 units delivered in the first quarter of 2018. Even if there are construction delays, a window of lower-than-usual supply will undoubtedly be present in 2018.

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RealPage’s lease transaction data also help answer a question we have received within the last two months, “Have lease terms shifted in Houston due to people only needing very short-term housing, such as three months or less?” In particular, the question was most often posed for Class A properties.

The average lease term for new leases fell to 11.4 months in the third quarter for Class A properties, matching the average term for renewals. There are a few important things to note. First, only one month of the third quarter would have included the impact from the hurricane, so the fourth quarter results could be more telling. On the flip side, the trend of lease terms shortening for Class A properties had already started in the second quarter (12.2) after peaking at the beginning of the year (12.7).

Finally, lease terms alone cannot gauge the strength of a market. The latest level for Class A is on par with 2013, a time when the apartment performance was incredibly strong. The thing to watch is whether turnover is higher than usual in 2018 due to those temporarily displaced moving back to single-family homes. While many will likely exit the rental market, it will happen as supply levels decline.

With all the variables at play, we see rent growth in Houston at least remaining around current levels in 2018.

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Elsewhere on the top-metros chart, Sacramento and Las Vegas remained in the top two positions, even though their rent-growth rates declined by 78 and 39 bps, respectively. Two Florida markets moved up to Nos. 3 and 4, with Jacksonville’s 67-bps rise and Orlando’s 91-bps increase generating the climb. Long Island’s 83-bps drop sunk it from No. 3 to No. 8.

Atlanta accompanied Houston is rejoining the chart, while Warren and Columbus dropped off. 

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