Performance Declines in Fourth Quarter, Apartment Data Shows

Metrics Still Above Long-Term Average

Axiometrics - 29 December 2016

The national apartment market continued to perform above its long-term average in the fourth quarter of 2016, though seasonal changes and continued declines in
major markets contributed to the lowest annual effective rent growth in 6½ years, according to early apartment data. 

  • The average effective rent nationwide was $1,277 per unit per month in the fourth quarter, compared to $1,245 in the fourth quarter of 2015, the apartment market research found.
  • That marked a year-over-year increase of 2.3% for the fourth quarter of 2016, more than 2 percentage points below the 4.6% rent growth of one year ago. This marked the fifth straight quarter in which the annual rent-growth rate decreased. Rent growth is still above the long-term average of 2.2%. The fourth-quarter rate was the lowest since the second quarter of 2010.

 “Though the market has moderated, it’s important to stress that we’ve seen a very strong market for more than six years,” said Jay Denton, Axiometrics senior vice president of analytics. “Axiometrics had predicted this moderation, since the market could not sustain the peak of 2014 and 2015. Now, we’re forecasting that though rent growth may fall below the long-term average for periods in 2017, it will remain positive, with a rebound expected in 2018 and 2019.” 

The negative rent growth in major markets with large inventories of apartments, such as Houston, New York and the San Francisco Bay Area, accounts for much of the moderation in the national market. Other markets, such as Seattle, Phoenix and Atlanta, are still performing strongly but have rent-growth levels one or more percentage points lower than a year ago. 

On the other hand, 36 of the top 120 markets – based on number of units and other factors – recorded annual rent growth of 4.0% or higher in the fourth quarter. 

“The fact that 30% of the top markets are performing at almost double the national long-term average is a sign of overall market strength,” Denton said. “Most of them may be secondary or tertiary markets, but they still reflect the overall positive performance and return of the apartment sector. Overall, we believe that supply and demand are in balance nationwide.” 

Other Fourth-Quarter Highlights

  • Effective rents decreased 1.2% in the fourth quarter over the third quarter, continuing a trend of quarter-over-quarter rent declines at the end of the year. The rent-growth rates for the past five quarters have been lower than the previous corresponding quarters.


  • The seasonal decline was evident at the market level, as only 34 of the top 120 markets – and only eight of the top 50 markets based on number of units – recorded positive quarter-over-quarter rent growth.
  • Occupancy was 94.7% in the fourth quarter, compared to 95.1% in the third quarter and 95.0% in the fourth quarter of 2015. The latest quarter was only the second time in the last six quarters in which occupancy was below 95%, but it was still well above the 1997-2015 long-term average of 94.1%.

Top 25 Markets for Rent Growth and Occupancy

The top 25 Metropolitan Statistical Areas or Metropolitan Divisions – among Axiometrics’ top 50 markets with the most apartments – in various fourth-quarter 2016 categories: