When it comes time to review
the state of the national apartment market and what the future
holds, we need to look at the past two
years. Both rents and occupancy went
up, a significant number of jobs were
created and construction boomed.
More millennials and baby boomers
now choose to rent rather than own a
property, which means the demand for
apartments has grown.
According to Axiometrics’ market
intelligence, though rents have been increasing at a slower pace than they did
from Spring 2014 to Summer 2015, annual effective rent growth (asking rent
minus concessions) is still well above
the seven-year-long term average of 2. 6
With an average of more than
200,000 jobs added each month and
the headline unemployment rate down
to about 5 percent, demand for apart-
ments is still strong. However, the sheer
number of units being built means
that supply is beginning to outpace
demand. Axiometrics has identified over 345,000 new apartments entering the
market before 2016 comes to a close.
That amount of new supply, compared to forecast-moderating job growth in the
second half of the year, has Axiometrics predicting rents to rise by 3. 2 percent for
the year—still nicely above the long-term average.
Apartment-market growth remains strong nationwide and in most markets, despite some moderation from the unsustainable heights of the past two years. Axiometrics partnered with AppFolio to study some of the top core markets and found
that the strongest rent growth is in the West and South regions. And it’s no surprise
that job growth in these hot markets is above the national average.
Leading the charge are Sacramento, Calif., which has recorded the nation’s
highest average annual effective rent growth so far this year at 11 percent, and Portland, Ore.—the only other metro area with double-digit average rent growth for
the first four months of 2016 ( 10. 2 percent). The sleeper among apartment markets
this year, Salt Lake City, has had one of the most meteoric rent-growth rises over
the past year. Rents are forecast to increase 5 percent over 2016 after averaging 6. 7
percent from January-April. Job growth of 2. 7 percent is predicted, enhancing demand. The list of top cities experiencing strong rent growth also includes Colorado
Springs, Co., Tucson, Ariz., San Diego, Las Vegas, Los Angeles and Atlanta.
And finally, to Austin—the Texas capital had one of the nation’s highest job-growth rates in April, 4 percent, which is expected to moderate to a still-robust 3. 2
percent by year end.
With job additions continuing in most sectors and regions, demand for apartments will continue to grow. The amount of new supply could be a moderating
factor, but rent growth is forecast to remain above the long-term average for the
The Growth of the Apartment Market
By Nat Kunes, AppFolio