Due to fewer deliveries of new product, and a tight housing market, have stabilized the nation-wide rent and vacancy rates, and new data shows that there is reason to believe the trend will continue. From the National Apartment Association:
After a stagnant first quarter performance, most metro markets saw modest rent growth and stabilized vacancy rates in the second quarter. The national rent growth rate has also stabilized, measuring 3.6 percent annually, according to RealPage. The Western markets of Sacramento, Seattle and Riverside-San Bernardino led the way. Unlike previous quarters, the San Francisco Bay Area has finally begun to show signs of recovery, with the San Francisco, San Jose and Oakland submarkets all posting increases above 1.0 percent. Houston, however, continues to experience rent decreases, although the rate of decline has begun to abate as the energy slump slowly dissipates.
While an onslaught of new construction dampened occupancy rates in fourth quarter 2016 and early 2017, conditions improved during the second quarter. Data from RealPage indicated national demand for more than 175,000 units, far exceeding the 86,431 units completed. Nevertheless, the market is still working through the glut of apartments from the two previous quarters, with occupancy now sitting at a still-healthy 95 percent. This is down slightly from the 95.3 percent a year prior.
Looking ahead into the remainder of 2017, a tight for-sale housing inventory coupled with rising mortgage interest rates may sideline more potential homebuyers, thereby buoying apartment demand. This could help support healthy rental demand in the traditionally more-expensive Northeast and West Coast markets. The slowing in multifamily starts at the national level is good news for markets overloaded with luxury product, but puts further pressure on the highly-sought-after Class B/C sector.