Average asking rents rose 0.9% over the first quarter of 2018, and average effective rents rose 0.8% according to preliminary apartment data.
The national apartment vacancy rate rose to 4.7% in the first quarter of 2018, up from 4.6% at the end of 2017 and 4.3% in the first quarter of 2017, according to Reis’s preliminary apartment data for the first quarter of 2018. The vacancy rate has risen by 60 basis points from its most recent low of 4.1% in Q3 2016.
The national average asking rent rose by 0.9% to $1,382 per unit over the first quarter of 2018, while the national average effective rent rose by 0.8% to $1,318 per unit. The average asking rent has risen 4.4% since Q1 2017, and the average effective rent has risen 3.9% over the past twelve months.
Net absorption was 27,875 units last quarter, and new construction totaled 39,917 units. Both totals fall below the 2017 quarterly averages of 44,707 units absorbed and 58,824 units constructed.
More than half of the 79 primary markets covered by Reis posted a slight increase in vacancy rates coupled with positive rent growth, including Nashville, Tenn., Austin, Texas, Portland, Ore., and Long Island, N.Y. Metros with the sharpest vacancy declines include Tulsa, Okla., Houston, Memphis, Tenn., Palm Beach, Fla., and Buffalo, N.Y.
Only one metro, Chattanooga, Tenn., posted an effective rent decline. Metros with the lowest rent growth included Milwaukee, Columbia, S.C., and Birmingham, Ala. Twenty-five metros experienced a 1.0% or higher increase in effective rent. Phoenix, Charleston, S.C., and Sacramento, Calif., experienced 1.5% effective rent growth in the first quarter, while Houston, Lexington, Ky., Atlanta, Dallas and Denver experienced effective rent growth between 1.3% and 1.5%. New York is among the bottom ten metros for quarterly effective rent growth, with an increase of 0.3% in the past quarter.
Reis senior economist Barbara Byrne Denham notes that while the apartment market has slowed since the end of 2017 and remained flat over the course of the winter, activity should shift over the course of the next two quarters as the housing market stalls. Denham attributes the shift in the housing market to the Tax Reform and Jobs Act, which has doubled the standard deduction, cut property tax deductibles, and reduced home ownership incentives.
The U.S. added an average of 276,000 jobs in the first two months of the year, up from an average of 221,000 jobs in the previous three months. San Bernardino-Riverside, Calif., Austin, Texas, Orlando, Fla., Seattle and San Jose, Calif., have all experienced job growth above 2.9% from January-February 2017 to January-February 2018, while New Haven, Conn., Fairfield County, Conn., Columbia, S.C., Wichita, Kan., New Orleans and Syracuse, N.Y., have experienced job loss in this period.
Many metros are expected to see growing completion levels in 2018, Denham says, such as Dallas, New York, Los Angeles, Denver and Atlanta. However, vacancy increases are not expected to exceed 2.5% in any market, as job growth is expected to fuel a demand for apartments.
By: Mary Salmonsen (MFE)
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