RealPage MPF Research Division Reports Moderate Growth of U.S. Apartment Rents in First Quarter 2013


Local performances converge near the national norm, leaving relatively few especially strong or especially weak individual performers

(April 2, 2013) — Effective rent growth for new leases in U.S. apartments registered at 2.6 percent as of first quarter, according to MPF Research, the industry-leading market intelligence division of RealPage, Inc. (NASDAQ: RP). Growth seen specifically in the January-March time frame came in at 0.5 percent. MPF Research analysts highlight the nation’s latest apartment rent growth statistics as well as other key performance indicators in a discussion found at

The annual rent growth pace is continuing to cool from its recent high of 4.8 percent seen at the end of 2011. Top-end apartment communities, in particular, are seeing prices rise more modestly. Rents grew 1.9 percent during the past year in the stock built since 2000, compared to increases of 2.4 to 2.9 percent in older product segments. When rent growth peaked just over a year ago, prices were rising 4 to 5 percent across all apartment product niches.

Pricing decisions are beginning to be impacted meaningfully by the wave of new apartment supply that lies just ahead, according to the MPF Research analysis. “Many owners and operators at the best properties want to be sure that their apartments are completely full when deliveries of new units ramp up during the coming months,” said Greg Willett, MPF Research vice president. “In turn, smaller price increases at the top-of-the-market projects are leaving a little less room for big rent bumps in the older stock.”

While the pace of rent increases is slowing, pricing continues to set all-time highs. Pricing has jumped 10.8 percent from the recession-induced low seen in late 2009, and rents are up 4.8 percent from the pre-recession high posted in the middle of 2008.

Among large individual metros, the three Bay Area markets of San Francisco, Oakland and San Jose rank as the country’s rent growth leaders. During the year that ended in first quarter, effective prices for new leases jumped 6.3 percent in both San Francisco and Oakland, while the upturn proved nearly as strong at 5.6 percent in San Jose.

Rent Growth Leaders in Q1 2013
Rank Metro Annual
1 (Tie) San Francisco 6.3%
1 (Tie) Oakland 6.3%
3 San Jose 5.6%
4 Denver-Boulder 5.4%
5 Austin 4.9%
6 Seattle-Tacoma 4.2%
7 Portland 3.9%
8 Houston 3.8%
9 New York 3.6%
10 West Palm Beach 3.3%

Annual rent growth also topped 5 percent in the Denver-Boulder area, where the increase registered at 5.4 percent. Rents jumped 4.9 percent in Austin and 4.2 percent in Seattle-Tacoma. Other large markets recording rent growth well above the national norm were Portland, Houston, New York and West Palm Beach, all realizing increases of 3.9 to 3.3 percent respectively.

At the next level of performance, big markets posting rent growth of 2.7 to 2.8 percent, or just a bit above the national average, were Pittsburgh, Detroit, Minneapolis-St. Paul and San Antonio.

Apartment rents were cut during the past year in a couple of big markets. Pricing declined 1.0 percent in Las Vegas and 0.6 percent in Virginia Beach-Norfolk. Sizable spots with annual rent change barely in positive territory were Sacramento, where pricing inched ahead 0.2 percent, and Memphis, where growth was held to 0.3 percent.

Rent growth has slowed nationally despite the fact that apartment occupancy rates remain very tight. Average occupancy of 94.8 percent registered in U.S. apartments as of first quarter, down a tenth of a percentage point both quarterly and annually.

“Apartment occupancy rates are holding at very strong levels,” according to Willett. “Even with a mild increase in the number of households leaving the apartment sector to buy homes, apartment demand is proving reasonably healthy. Helping support the market, job creation for young adults is proving strong enough to spur some new household formation among those who had been living at home with mom and dad.”

Demand for 86,569 apartments was posted across the country’s 100 largest metros during the year ending in first quarter, according to the MPF Research data. That product absorption figure registers mildly below completions totaling 107,626 units. Specifically during first quarter, demand came in at 11,633 units, compared to completions of 27,346 units.

MPF Research anticipates that apartment rent growth will accelerate slightly to get back to the mark of 3 percent as 2013 progresses, before the pace of increase cools once again to around 2.5 percent in 2014. “The completions on the way over the next few months appear likely to perform very well without damaging the occupancy performances of the already-existing stock,” Willett said. “That should give operators of the current apartment base the confidence to push a little harder on rent increases. As we get into 2014, however, the amount of new product moving through initial lease-up should be large enough to slow pricing momentum to some degree.”

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