Yet another report came out this week that illustrates just how strong 2015 was for the apartment industry.
In its report, Yardi cites 6.4% rent growth for last year, which beat the long-term average of 2.8%. And December rents increased 190 basis points above the 4.5% growth in 2014.
“Going forward, we expect rent growth to cool somewhat but remain above the historical average," the report states. "Nationwide, demand will remain robust as the large millennial generation reaches renter age and many form households, while empty-nest baby boomers increasingly trade down from oversized houses.”
Portland, Ore., (14.8%); San Francisco (11%); Sacramento, Calif., (10.7%); Seattle (10.5%); and Los Angeles (9%) had the highest rent gains in the fourth quarter. A large majority of cities, 21 of 30 metro areas, had rent growth of over 5%, and these cities can expect to see even stronger growth in 2016, according to Yardi.
The cities that had the smallest rent gains in 2015 were Richmond, Va.; Washington, D.C.; and Baltimore. Echoing other reports, Yardi says Washington's rent gains have been held back because of the large amount of new supply in its market, while Baltimore still lacks job growth. These cities can expect to see similar results in 2016, Yardi says.
"Growth will continue to be slower in metros in the Midwest and Northeast, which are seeing outmigration of population and/or tepid job growth," Yardi notes in the report. "Metros in the Northeast and Mid-Atlantic are also relatively expensive, and the affordability gap gives owners less leeway to raise rents. Metros with concentrations in the energy sector—with Houston being the largest—will struggle with job losses caused by lower oil prices."