Rents are leveling off as inventory moves toward meeting ever-strong demand and apartment markets soften, according to the National Multifamily Housing Council’s (NMHC) October 2016 Quarterly Survey of Apartment Market Conditions.
“The growing supply of new apartments, primarily in the Class A space, appears to have finally reached a level to slow the historically high rent growth,” said NMHC Chief Economist Mark Obrinsky in a statement on the survey. “Additionally, debt and equity markets are more discerning in terms of what deals they are ready to take on, including the continued slowing of available construction loans. Despite the softening due to the new development focus on Class A apartments, the overall fundamentals for apartments remain stable, indicated by the strong demand for Class B and C properties.”
The survey indicates a Market Tightness Index at 28—the lowest level since July 2009. The Sales Volume Index, to compare, stands at 42, down from 50.
Markedly, 84 percent of respondents to the survey reported rent growth for Class B and C apartments as “much stronger” or “somewhat stronger” than that of Class A apartments, which, as Obrinsky noted, have seen higher supply. Just 5 percent of respondents reported “weaker” rent growth among Class B and C units, and 9 percent reported negligible differences in rent growth among the classes.