CARROLLTON, TX—Annual effective apartment rent growth for new leases reached 5.9% nationwide during the third quarter, the second fastest growth rate on record, MPF Research said Wednesday. However, the national average was skewed upward by rent growth in the West during Q3, which at 8.4% was as much as 233% higher than that of other regions.

Although multifamily rent growth in all four regions is up compared to the year-ago period, the year-over-year increase in terms of percentage points is greatest in the West. Led by Portland, OR with 14.3% annual effective rent growth for new residents, the region is home to 10 of the 15 fastest growing markets in the country. Outside the West, annualized rent growth reached 4.7% in the South during Q3, 4.5% in the Northeast and 3.6% in the Midwest.

Renewals, as well, saw annualized rent growth during Q3, with pricing up 5.4%. That's a key consideration for multifamily owners and operators, given that more renters are opting to renew rather than move out when their leases expire. Retention rates have been climbing over the past five years, and in Q3 51.1% of renters with expiring leases chose to renew them.

“Sizable rent growth for both new resident leases and renewal leases speaks to the apartment sector's overall health,” says Greg Willett, chief economist at RealPage, MPF Research's parent company, and head of the research and analysis team at MPF. “Job growth is strong enough to spur meaningful new household formation, and the net demand level for apartments is also helped by the limited number of households leaving the rental market to make first-time home purchases.”

While the volume of new construction has been flagged anecdotally as a concern over possible overbuilding, MPF figures show that the number of units being built in the nation's 100 largest metro areas during Q3—a total of 436,407—wasn't meaningfully different from what we've seen over the past 10 quarters. Nor has new supply put a damper on rent growth, although that has been the case historically.

“Construction of luxury units in the most desirable neighborhoods results in new product rents that are too high to pull many residents out of the existing stock,” Willett says. “Nationally, the typical monthly rent for new communities is around $1,600, more than 15% above typical rents in the best properties built prior to 2010.”

Wilett will be among the multifamily experts taking the stage for a panel discussion at this year's RealShare Apartments conference, scheduled for Oct. 21-22 at the Westin Bonaventure in Los Angeles. Click here for further information and to register for the conference.