DALLAS—Annual effective rent growth has continued flattening out, especially in the urban core of many markets, according to Dallas-based Axiometrics. Nationally, effective rent growth for apartments in January remained essentially flat at 2.8%, compared with 2.7% in December 2013. The annual growth rate peaked at 5.3% in June 2011, and has slowed in eight of the past 12 months.
“As we get further into 2014, concern remains about which MSAs will become oversupplied as new supply outpaces demand,” says Jay Denton, VP of research with Axiometrics. The company has projected that 240,000 new units will be delivered nationwide by year’s end.
Denton notes a divergence in rent growth performance by asset class, “with class A properties once again generating the highest rent growth numbers, reversing a trend where class C apartments had shown the strongest growth in recent months. It will be interesting to see if class A properties can keep up the momentum” in the face of this year’s deliveries.
As of January, the occupancy rate nationwide was 94.1%, down five basis points from the previous month but up five bps year over year. Forty of the top 121 MSAs currently have an average occupancy rate greater than 95%. Axiometrics’ forecast predicts that occupancy will peak in mid-year before falling off in 2015, although the data and research firm notes signs that occupancy might have lost more momentum this past fall and winter 2013 compared to a year earlier.
In related news, Axiometrics says that building permits declined for the third straight month, suggesting some underlying weakness in the housing market. Privately owned housing units authorized by building permit in January, measured on a seasonally adjusted annual rate, stood at 937,000, a decrease of 5.4% from December’s revised rate of 991,000. Nationally, the numbers for the trailing 12 months were up 13.7% Y-O-Y.
Given its status as the nation’s most populated area, it’s not surprising that the New York City MSA saw the largest number of multifamily permits for the trailing 12 months that ended in January: 21,422, up 46.1% from a year earlier. The second largest MSA for permitting was Houston at 17,751, although the Y-O-Y increase was about half of that for the New York City metro area.
The Southeast and Midwest share honors for the 10 MSAs with the greatest Y-O-Y percentage increases in apartment permitting. Leading the way was Ann Arbor, MI, up 810.7%; followed by Cape Coral-Fort Myers, FL, up 338%; Naples-Marco Island, FL, 335.7%; North Port-Bradenton-Sarasota, FL, 288.6%; Chattanooga, TN, 265.5%; Indianapolis, 245.4%; Palm Bay-Melbourne-Titusville, FL, 200%; Miami, 172.8%; Warren-Farmington-Troy Hills, MI, 146.1; and Kansas City, MO-KS, 144%.
Single-family permits in January stood at 602,000 units, a 1.3% decrease from December, but 2.4% higher than January a year earlier. Annual multifamily permitting decreased 13% from December’s annual rate but was 2.7% higher than the comparable period a year ago.