Economy Watch: U.S. Apartment Market Still Robust, But Slowing a Little

The market's still pretty healthy for landlords.

Did 2015 represent peak apartments? That isn’t clear yet, and the latest Reis report on the U.S. apartment market, which was released on Wednesday, sheds only a bit of light on the subject. For instance, vacancies are edging up, which would argue for a plateau. But rents are still increasing, which argues against it. Then again, rents aren’t rising as fast as in recent years. In any case, the market’s still pretty healthy for landlords.

National vacancy increased by another 10 basis points during the quarter to 4.4 percent, Reis reported. The national vacancy rate has risen 20 basis points since reaching its cyclical low, most recently during the second quarter of 2015—if in fact that will turn out to be the cyclical low. Considering the robust demand for apartments, vacancies could drop again.

Asking and effective rents both grew by roughly 0.8 percent during the quarter. That’s slightly slower than last quarter, but still well ahead of inflation. Year-over-year rent growth continues to accelerate–asking rents grew by 4.5 percent during 2015 while effective rents grew by 4.6 percent. That’s the strongest calendar-year rent growth since ’07.

New construction during the quarter totaled 49,418 units, Reis noted. That’s roughly on par with the pace during recent quarters, but the overall trend of increasing construction continued. For 2015, 188,306 units came online, the highest calendar-year total since 188,870 units came online in 1999. Also, the construction pipeline continues to swell, suggesting that construction figures for 2016 will likely top those from 2015, so perhaps vacancies will continue to edge up after all.