More supply sees residential property rent growth slow in the US

Taylor Scott International News

Annual rent growth in the United States has slowed for the third month in a row but rents are still rising faster than historical norms, according to the latest index data. Rents appreciated 4.5% year on year in October, down from 5.3% in September, down from a high of 6.6% in July and it is mostly due to more properties, specifically apartments, coming onto the market, the Zillow real estate market report shows. A breakdown of the figures shows that tents in large multifamily buildings rose 3.9% annually, while single family home rents grew 4.5%. Overall, newly built apartment buildings are finally opening for new residents and slowing the rate of rental appreciation across the country, but rents are still rising much faster than the historical norm and continue to rise faster than incomes, according to the report. The report points out that multifamily housing starts have been increasing since late 2009, and as units become available, the pace of rental appreciation is slowing. Lack of inventory has been a leading cause of the ongoing rental affordability crisis, especially in fast growing markets. Even the hottest rental markets, which have seen double digit rent appreciation for the past five months, are growing at a slower pace although rents are still rising there more than twice as fast as the national average. The San Francisco metro has the fastest rental appreciation among the nation's 35 largest markets. Rents there are up 15.2% from last year, but they were growing as fast as 19% annually in June and July. ‘Rental appreciation has started to slow down in part due to more rental supply. Many of the bigger multifamily rental projects that were begun a couple years ago in cities nationwide are finally starting to open for occupancy, easing pressure on rents somewhat,’ said Zillow chief economist Svenja Gudell. ‘But despite this recent slowdown in rental appreciation, the rental affordability crisis we've been enduring for the past few years shows no signs of easing, especially as income growth remains weak. It will take a lot more supply, and a lot more renters turned home owners, to fully reverse this trend,’ Gudell added. As rents have grown and rental affordability continues to suffer, the stability and relative affordability of homeownership may be pushing some qualified renters to make the jump to home ownership. A widely expected December rate hike from the Federal Reserve could be an additional incentive for buyers to enter the market while rates remain low. Reflecting this, home values are growing at their fastest pace since November 2014, up 4.3% to a Zillow Home Value Index of $182,800. Taylor Scott International

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