Rent Gains Soften as More Multiunit Buildings Enter Market: Trulia
By: Esther Cho
Rents continued to rise in January, but at a slower pace as more newly-constructed multifamily units hit the market, according to a report from Trulia.
National rents rose 4.1 percent in January, down from the 4.7 percent increase seen earlier in the year in July, data from Trulia revealed.
“Rent gains are slowing down because of more supply, not less demand,” said Jed Kolko, Trulia’s chief economist. “Many of the multi-unit buildings that have been under construction over the past two years are now coming onto the market.”
The most drastic decrease in rent gains from July to January occurred in San Francisco, where rents rose year-over-year by 2.4 percent, down from 11.5 percent in July.
Citing data from the Census Bureau, Trulia explained construction activity in the city has been well above normal for the last year, with most activity for multi-unit buildings.
The next two metros where rent gains slowed the most were also located along the West Coast: Portland and Seattle, where rents both decreased by 4.4 percent from July to January. Despite the slowdown, Portland still experienced a 4.7 percent year-over-over gain in January, while Seattle saw rents rise by 6.4 percent during the same time period.
Denver and San Diego took the last two spots on the top five list after seeing rents fall by 2.9 percent and 2.4 percent, respectively. Both metros still ended with rent gains in January: Denver (+7.4 percent) and San Diego (+4.4 percent).
Trulia also revealed improvements in asking prices beat the gains seen in rents, with national asking prices rising 5.9 percent year-over-year in January.
Though, Kolko warned, “dramatic price gains can mask serious red flags.”
“Strong job growth, low vacancy rate, and low foreclosure inventory–not huge price gains–are signs of a healthy housing market. Without strong underlying market fundamentals, price rebounds might be here today, but gone tomorrow,” he explained.
According to Trulia, “booming” markets with the underlying fundamentals are San Francisco, Seattle, Denver, San Jose, and Salt Lake City.
“Humming markets,” or those with strong fundamentals, minus dramatic price gains, are Houston, Boston, Raleigh, and Dallas.
“Rebounding” markets-big price gains, weaker fundmantals-include Phoenix, Las Vegas, Riverside-San Bernardino, and Detroit.
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