With little exception, annual rental growth rates have decreased by 50 percent or more across the country from their 2006 second quarter levels, according to the “Apartment Market Early Edition” survey completed May 24 by Dallas-based industry research firm Axiometrics. The survey of apartment properties in Albuquerque, N.M.; Birmingham, Ala.; Dallas and Ft. Worth, Texas; Las Vegas; Nashville, Tenn.; and Orange County, Calif., points to a broader national trend of slowing or stagnant rent growth and lower occupancies, according to Axiometrics president Ron Johnsey.

“Seattle and Northern California are the exception to the rule, but otherwise we are mostly seeing annual rental growth rates cut in half, or remaining negative, and we are seeing occupancy starting to fall as well,” Johnsey says. Out of the six markets covered by the survey, only Nashville rent growth slowed by less than half, decreasing from 4.2 percent to 2.8 percent. Birmingham, meanwhile, was hardest hit, with rent growth plummetting from 5.6 percent to -0.9 percent.

Several years of overzealous construction is partly to blame for the current retardation in rent growth. With plenty of empty condo projects and higher single-family inventories on the ground in most major metro markets, construction-related jobs are in the tank, further exacerbating occupancy levels and the power to push rents in the apartment sector. “In order to build all of these single-family homes, that was a lot of employment,” says Johnsey. “You get a 40 percent drop in single-family permitting, even though multifamily is up, you're going to have a lot of people looking for work, and when that happens, rent growth is going to go down.”