According to reports from three research companies, the apartment rental market cooled in the first quarter of 2016. The Wall Street Journal suggests this could be a signal that the six-year boom, which has pushed the cost of housing to “unaffordable heights” in many US cities, is now coming to an end.
But while others believe that US rents will still grow, albeit at a slower pace, some markets may become more affordable on account of weak demand and poor-performing economies. Therefore, renters could quite easily benefit from lower prices on sites like ForRent thanks to an increasingly sedate market.
Look into my earlier post on saving money while renting. Before we discuss the slowness in the rental market further, if you’re now renting.
Slowing demand means cheaper rent
Apartment tracker MPF Research recently revealed that demand for new apartments in the first quarter was about half its typical level. In fact, the number of occupied new apartments across the US climbed by just over 20,000 units in the first quarter, compared with the five-year average of around 40,000.
“The past few years everything you touched was gold in the apartment industry, and that’s not going to be the case this year,” said Jay Parsons, vice president for MPF Research.
(See Also – Tips for first-time renters)
The WSJ also reported that many of the country’s largest and hottest rental markets are struggling, with a flood of new construction and significant price increases affecting New York, San Francisco, Denver, and Houston in particular.
As a result, some developers are offering concessions such as a month or more of free rent to bolster tenancies. In fact, the Elliman Report by real-estate appraiser Jonathan Miller revealed that the share of Manhattan rentals offering concessions rose to nearly 14 percent from around 5 percent a year earlier.
Even though renters can potentially take advantage of some great prices and packages, the market’s recent slowdown may be short-lived, with some analysts saying it is simply leveling out.
A word of warning for renters
Svenja Gudell, chief economist at Zillow, believes that cheaper rent is the likely result of relatively weak demand and sluggish local economies with limited job growth, combined with some new supply coming in line.
“The slowdown in rental growth will undoubtedly provide some welcome relief for renters who’ve been experiencing sometimes dramatic rent increases every single year for the past few years,” she said.
Unfortunately for renters, Gudell also warned that even with the slowdown in rental appreciation, costs will keep rising and remain unaffordable for many major markets across the US, which could play into the hands of landlords.
“Renters in San Francisco and Los Angeles, for example, can currently expect to spend more than 40 percent of their income on a rental payment, and it’s not as though rents are expected to go down in those markets this year,” she added.
So, as opposed to a downturn, rent growth is actually just coming down from 15-year highs across most markets in the US, while vacancy rates are easing up from their lowest levels in as many years. Bear this in mind before you rush to try to use the current conditions to your advantage.
Readers, what’s your experience in renting? How you anticipate this to change?