Apartment rent increases slowed further in the first quarter. It is expected to ease financial stresses for low- and middle-income households over the next couple of years.
According to RealPage, a real estate technology and analytics firm, the average rent rose 2.3% to $1,310 in the first three months of the year. That marks a declination from the fourth quarter’s 2.6% pace and the smallest yearly gain since the third quarter of 2010.
Equally significant is that apartment occupancy in the first quarter fell to 94.5%. A historically an average calculated 95% from 2012 to 2017. During that period, tight apartment supplies and surging demand from Millennials pushed occupancy and rent higher.
The price moderation can be traced to a massive wave of apartment construction the past few years. About 319,000 units were completed over the past 12 months and another 314,000 are expected the next year, Willett says.
Renters won’t immediately feel the benefits. For several years, rent hikes have outpaced slightly warm annual wage growth averaging 2% to 2.5%.
But pay increases picked up recently to 2.6%, Labor Department figures show. Many economists expect gains to approach 3% by the end of the year as the low unemployment rate forces employers to bid up for workers.
Over the next year or two, “Household income is going to move up faster than rent,” Willett says. “That’s a more comfortable situation.” He expects rent growth to stabilize at about 2.5% during that period.