Rents continue to rise but may no longer be accelerating. As measured by the Consumer Price Index component on the renters’ rent, the annual growth rate appears to have stabilized at near 3 percent after rapidly rising from 2010.
According to REIS, private sector data covering only the large metro markets, rents are rising by 3.2 percent, a bit faster than the government data. With apartment vacancy rates falling to the lowest rate in over a decade, now at 4.0 percent vacancy rate from 4.4 percent a year ago, rents could easily start to accelerate again.
According to a survey of REALTORS®, nearly half reported rising rents while less than 10 percent reported falling rent. But the sizable rent increases of 6 percent or higher are now less prevalent than several months ago.
Permits to build new apartments are rising. Perhaps, this new supply will put the lid on rent growth. But the recent increases in supply appear to be only of returning to normal and certainly not an oversupply.
Rents, therefore, are likely to rise by at least 3 percent this year on a nationwide basis, with 4 percent not out of the realm of possibility. With wage growth barely scratching 2 percent growth, the renters are getting their life squeezed out.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.