Major apartment complex owners across the US are seeing a slowdown in the rental market. Out of the 79 metropolitan areas covered by Reis Inc, including Portland, New York, Boston, Denver, Los Angeles, and Washington DC, 28 have seen a recent flattening or decline in rents. Nationwide, rents increased 3.2% in the first quarter, compared to a 5% increase the previous year.
According to data collected from the apartment tracker Axiometrics Inc., due an increase in supply, the occupancy rate of apartments has seen a decline to 94.5%, from 95.1%. This is while apartment developers have delivered around 100,000 more units across the US.
According to Greg Willet, chief economist at RealPage Inc., which recently acquired Axiometric, the reason for the decline in rents in the apartment market is the increase in supply. Demand is slowing, and the supply is increasing, causing this economic decline. Additionally, the mismatch is especially seen at the higher end of the market, where rent growth is zero or flat in most of the metro areas. The major markets of the country are not working in a normal way. The rents in the San Francisco area have fallen 1.3% in the first quarter, compared to the data from the previous year. On the other coast, the rents in the New York area have also fallen 0.6%, as reported by Reis.
As Mr. Willet is suggesting, owners are starting to get nervous in the areas of New York and the Bay Area. Real-estate agents in the Bay area have shared that tenants are succeeding in convincing their landlords to not raise rents. And people who are moving into new apartment housing are often receiving offers that include two months of free rent, and six months of free parking. Offers with a potential worth of thousands of dollars can be a great disadvantage to landlords and the overall apartment market.
According to the analysts, the full year of 2017 may show a continued slowdown in the rental market. This prediction is easily shown from the signs of softening in San Francisco, New York, and other major cities. However, the winter months are normally quite slow, and demand is expected to have shown increases in the spring months. With an increase in demand, the market may stabilize.