The first quarter of the year showed a nationwide figure of 4.1 percent. While it may be a relatively high percentage, it indicates a notable decrease from last year’s five percent gain which the industry enjoyed. What could be the possible reasons? For the past seven quarters, rent growth has been equal to or higher than 4 percent. On the contrary, the wage growth rate in the country has been far lesser than this rate. This means residents are not financially empowered to meet the demands of rising rent rates.
From previous years’ data, the biggest metropolitan markets have been recording the highest rates. However, they seem to be the most affected in current circumstances. Many youthful workers who feel rent demands are too high are settling for the smaller metropolises. Rents in the smaller cities are now surging while the bigger cities face a significant decline in rent demand.
While the declining rent growth in major metros like Denver, Houston and New York continue to persist, there is a counterbalance of the situation in the secondary metros. Orlando and Sacramento are among the smaller cities benefiting from the situation as they have recorded impressive double-digit growth rates in rent.
In past years, Boston, Texas, and San Francisco are a few of the cities that have recorded the highest rent growths nationwide. However, their annual gains now stand at only a little over 5 percent. Despite the situation, the national rate for occupancy remains high at 98.4 percent in the first quarter. This figure is only slightly below the previous year’s last quarter and close to the all-time highest first quarter rate of 94.8 percent.
Meanwhile, there are still new housing projects in the major markets by real estate and housing agencies. However, most of these are being done at the request of mainly the elites. Smaller cities continue to record a lower supply of apartments in comparison to their demand, which is a major reason for the strong rent growths in the regions. The real estate operators have been quite busy and look likely to reduce rent rates sooner than later.
Denver has been known as the hottest apartment rentals zone and market in the country. Considering the turn of events, they may be relinquishing that feat in the next couple of years. The average American wants to save more and reduce cost. Many will consider relocating to less costly residencies. Very soon, we are bound to see major expansions in the smaller cities.