U.S. Rent Growth Flatlines As Massive Flood Of New Apartment Supply Finally Takes Its Toll
Incoming apartment supply isn’t just lowering national average rents; it’s also making some of the country’s most historically pricey markets just a little bit more affordable. “The huge number of apartments entering the market benefits all renters – but especially those in the country’s more expensive areas,” said Doug Ressler, Senior Analyst for Yardi Matrix. “More apartments mean more choices – and, ultimately, more bargaining leverage for the renter.”
Take Manhattan, for example. The exclusive NYC borough has long been the most expensive place to live in the nation, but thanks to a recent 3.1% dip in rents year-over-year and the huge inventory expansion, it’s slowly becoming more accessible to the region’s growing population. With more than 7,000 units to be delivered in 2017, rents in the area now run $4,054 – a huge downturn from the $4,154 rents seen at the start of the year.
With so many new units hitting the market, Ressler says some communities are forced to offer serious amenities in order to stay competitive. “These new apartment communities often come with upscale amenities, including 24/7 fitness centers, yoga studios, rooftop farms and pet spas,” he said. “Some even offer concessions, like a month of free rent or free gym memberships. These perks aren’t limited to overly-popular markets such as NYC or San Francisco, either. Minneapolis is also seeing tons of new, top-notch apartments added to its rental market, as is Nashville and Orlando.”
Meanwhile, areas with stronger job markets and better overall affordability are still seeing demand growth which, combined with a lack of capital investment, is driving rents considerably higher.
Midland, Texas, is a prime example of this. Texas has added more than 319,000 jobs over the last year, and unemployment is at record lows. Midland came in with the second-lowest unemployment rate in the state, with just 3.5% of residents without jobs in June. This healthy economy has led to serious population growth over the past few years, and more than 25,000 people have moved to the area since 2010. Apartment construction has been unable to keep up with this growth – and the subsequent rising demand – and rents have skyrocketed in the city. The average Midland apartment now costs $1,180 per month – a whopping 18.1% higher than this time last year. Nearby Odessa is also seeing a similar problem. The city’s rent has grown 13.4% over the year, hitting $1,013 in July.
Finally, here are the top 10 most and least expensive rental markets in the U.S. at the end of July 2017. To our complete lack of surprise, New York and California continue to dominate the expensive list while Southern and Midwestern markets continue to provide the best value...perhaps this is why all those domestic migration studies show a mass exodus from the cities on the left to the cities on the right? Just a hunch...