Rental Recap: National Average Apartment Rent up 2.5% Year-over-Year
Traditionally, rapid rental rate appreciation is associated with large outlier markets like New York City, Washington DC, and San Francisco. However, an annual survey by RENTCafe, suggests small and midsize cities may be experiencing greater year-over-year fluctuations in rental rates than larger markets. According to the survey, the national average apartment rent increased 2.5% annually, and 24% in the past 10 years, to a rate of $1,359 per month at the end of 2017.
Small markets across the country experienced the highest year-over-year gains, with double digit increases in Odessa, TX, up 33.6%, Midland, TX, up 28.2%, and Buffalo, NY, up 10.3%, followed by Lancaster, CA up 9.8% and Reno, NV up 9.5%. These small to midsize markets are hurting from a lack of available rental inventory and construction slowdown. 63% of small cities reviewed in the survey saw a rental rate appreciation larger than the national average.
Some large markets, specifically the Manhattan and Brooklyn neighborhoods in New York City, actually saw rents decelerate, with each market down 1.7%. The survey reports, that one of the most defining trends of 2017 was a price appreciation slowdown in some of the nation’s most expensive markets. Overall, New York City, NY, Austin, TX, San Francisco, CA, and Washington DC all saw rental rates either decrease, increase at a slower pace, or remain unchanged year-over-year.
The slowdown in rental rate appreciation may be due in part to a revitalized construction industry in some parts of the country. Las Vegas, NV, for example, was hit hard by the housing crash but has now seen rental rates rebound 6.3% from 2016 to 2017 and 30% in the past five years. In total, the Bureau of Labor Statistics reports the construction industry added 210,000 jobs nationally in 2017, up 35% from 2016.
Even as construction picks up, multifamily residential construction may be a lower priority compared to other areas. A survey of the Associated General Contractors of America states that 75% of construction firms plan to hire more workers. However, contractors are most optimistic about building office space. Though housing starts have increased in recent months, the data has been somewhat volatile, and has yet to meet the strong demand.
With housing affordability continuing to impact both the rental and buyer markets, construction activity is needed to replenish lack of inventory in slow price appreciation.
Sources: CNBC, HousingWire, RENTCafé