DALLAS, TX - National annual effective rent growth remained nicely above the long-term average in July 2016, though continued slides in the San Francisco Bay Area, New York and Houston affected apartment rent trends, driving the national rate down to 3.1%, according to Axiometrics, the leader in apartment and student housing market research and analysis.
The July rate was the lowest since the 2.8% of February 2014.
"Some of the primary markets are seeing separation from smaller metros, which is bringing down the national rate," said Jay Denton, senior vice president of analytics for Axiometrics. "The good news is that many markets and submarkets are still posting robust growth rates. The best performance tends to be secondary markets and suburban locations."
Though July was the ninth month of the last 10 that national annual effective rent growth has decreased, Axiometrics expects the market to stabilize by the end of 2016, when rent growth is forecasted to be 3.2%. Rent growth remains above the long-term (1997-2015) average of 2.2%.
The occupancy rate is one sign that the national apartment market remains in good shape. Occupancy was above 95.0% -- the rate at which Axiometrics considers a property or market full -- for the fifth straight month and the 12th month of the past 16.
The Impact of Primary Markets
Some 20 markets among Axiometrics' top 50 metros, based on number of units, recorded rent growth of 4.0% or higher in July. The issue is that none are what are commonly referred to as "primary markets," such as New York, San Francisco and Los Angeles.
Seattle, Phoenix, Atlanta, Dallas-Fort Worth and Tampa St.-Petersburg are among the larger markets with the highest rent growth, but these are often considered "secondary markets," though Seattle is considered a primary market in some circles. Markets referred to as "tertiary," such as Sacramento, Riverside, Salt Lake City, Las Vegas and Nashville, make up the bulk of the top-markets list.
Meanwhile, some primary markets went negative, as the combined effects of slowing job growth and increased supply took their toll.
Houston's -2.2% annual effective rent growth in July marked the fourth straight month the metro was below zero.
San Francisco apartments fell 1.21 percentage points to -0.7%, the first time the market was negative since April 2010.
New York apartments' -0.2% annual effective rent growth in July was the first time it was in negative territory since January 2014.
San Jose and Philadelphia were still positive in July, but with 0.3% and 0.4% rent growth, respectively, a dip below zero is possible.
"Lower rates of job growth and an abundance of new supply have been causing decreased apartment performance in metros like the Bay Area, New York, Houston and Philadelphia," Denton said. "The pace of construction does seem like it will subside in most areas in 2017, but relief from new deliveries will not truly be felt until 2018."
West, South Continue Metro Dominance
The West and the South regions have housed the apartment markets with the highest annual effective rent growth for quite some time. That's still the case, as 16 of the top 17 rent-growth metros among Axiometrics' top 50 for July are located south of Interstate 40, west of Interstate 15 or both.