Apartment Rents Are Moving in Many Markets
U.S. apartment effective asking rents are down 1.3% year-over-year in October data from RealPage, Inc. The nation’s average price is now $1,412.
Dig into the details and you’ll see a stunning range of individual market performances. Some areas are experiencing sizable price growth at the same time that rates are being slashed drastically in other locations.
Here’s the Good News
While rents are down for the nation as a whole, more than two-thirds of the 150 core metros included in RealPage’s data set actually register price increases.
Many of the rent growth winners are smaller markets. Influencing these results, many small metros have limited economic stakes in the hospitality and retailing sectors that account for so much of the country’s job loss. Also, small markets generally aren’t having to deal with a big wave of just-opened projects that have discounted rents during initial lease-up.
Leading the pack among the small markets, Fayetteville, NC registers annual growth of 8.6% in its effective asking rents, while prices are up 8.1% in Boise, ID and 7.4% in Stockton, CA. Additional small markets recording rent growth between 6% and 7% are Fresno, CA; Mobile, AL; Grand Rapids, MI; Huntsville, AL and Flint, MI.
Turning to the country’s bigger apartment markets – with at least 100,000 market-rate units – Riverside/San Bernardino and Sacramento are rent growth rock stars, performing far better now than they were pre-pandemic. Effective asking rents are up 7% year-over-year in Riverside/San Bernardino. The annual increase is 6.1% in Sacramento. Both markets seem to be benefitting as some renters bail out of the country’s most expensive living environments. Riverside/San Bernardino is picking up households leaving neighboring Los Angeles, while Sacramento is attracting some who had been living in the Bay Area metros of San Francisco, Oakland and San Jose.
Bigger metros where effective asking rents are up 4% to 5% annually are Virginia Beach, Memphis, Greensboro/Winston-Salem and Detroit.
Phoenix is another bigger metro worth mentioning. The market was the country’s hottest performer pre-pandemic. While rent growth has slowed from its earlier pace, today’s annual upturn of 3.9% is still very solid.
Rent Cuts Have Gotten Ugly in Other Locations
Apartment rents are down from year-ago rates in 41 of the 150 metros tracked here, with huge losses in some instances.
The small West Texas Oil Patch market of Midland/Odessa is taking the more severe beating. Effective asking rents are down 31.8% annually.
Other areas suffering especially large price declines are bigger metros, most notably including the gateway markets where rents are higher than in the rest of the country. Effective asking rents are down on a year-over-year basis by 17.4% in San Francisco, 13.8% in San Jose and 13.1% in New York. These areas still certainly aren’t bargains, however. Average monthly rates top $3,100 in New York, $2,800 in San Francisco and $2,500 in San Jose.
Effective asking rents are off year-ago pricing by 7.2% in Boston and by roughly 5% in Austin, Chicago, Oakland, Seattle and Washington, DC.
Something to note about these areas is that they’re now experiencing a pronounced spike in apartment resident churn. Households are playing musical chairs, moving from one property to another or even from one unit to another in the same building in order to upgrade their accommodations while pricing is down.
Occupancy Is Stable and Healthy
While apartment properties are competing with each other to secure renters who have stable employment and are likely to be reliable when it comes to making payments in the near term, the nation’s apartment occupancy performance actually remains strong.
Occupancy averages 95.7% for the nation as a whole, barely slipping at all from the year-ago figure of 95.9%.
Only a handful of spots record meaningful vacancy issues. Most notably, occupancy in Midland/Odessa is down to 85.3% from the year-ago level of 93.9%, and San Francisco’s rate is down to 92.6% from the year-ago reading of 95.9%.
Most of the country’s vacancies are in luxury properties. Occupancy comes in 94.6% for the top-tier Class A stock versus rates of 95.8% in middle-market Class B properties and 96.3% in lower-end Class C communities.
Urban core apartment towers have taken the biggest occupancy hit over recent months. The current occupancy figure of 92.7% in high-rise properties is off from 95.2% a year ago.