This article was written in-part by Tiffany Ko.
The state of the multifamily housing sector for June is here! The average rental rate grew since March, but rent prices are still unpredictable. According to ADOBO, the top five cities that experienced growth in rent are Philadelphia, Reno, Rochester, Tulsa, and Riverside, ranging from 6% to nearly 12%. On the other hand, the top five cities that saw a moderate decrease in rent prices include Buffalo, St. Paul, Fresno, Virginia Beach, and San Jose, ranging from –3.3% to -4%.
New Orleans, which has been on the country’s top 10 for greatest rises in rent, has surprisingly been kicked off the list. Just two months ago, the city experienced the largest increase in the country. In contrast, the biggest decrease this month is Buffalo, NY, but only by 4%. According to our friends at ADOBO:
“When it comes to the most expensive markets in the country, the usual suspects make up the top three — San Francisco, New York City and San Jose.”
In addition, the top highest rents in the nation include Boston, D.C., and Los Angeles.
The city with the greatest rent increase goes to Philadelphia with a whopping 11.7% increase since last month. This is a little unusual considering rent prices are typically reasonable compared to other major cities. The demand for apartments remains steady since the job growth in the city continues to be high, and there are many college graduates in Philly looking for cheap rent. However, investors need to keep in mind that many tenants in the city are looking for inexpensive apartments rather than high quality units. This hike is great for developers and owners but bad news for renters. According to Lubert-Adler’s CEO, Dean Adler says a recession is on the rise and that investors should focus less on IRR.
Because rent prices have hiked in the U.S. over the past year, it is expected that demand will drastically change in the third quarter of this year. The total increase of pricing so far this year is 15.2%. Consumers are seeking affordable apartments, and about 320,000 new apartments are coming to the market later this year. However, the majority of these units will come with an unattractive price tag, which will put landlords in a price competition by the end of 2017. Earlier this year, some landlords offered concessions as part of the new apartment supply, and NYC developers offered potential tenants free rents for the first three months if they signed a lease.
Trends in the market and the demand for apartments is shaky. Both landlords and investors are changing how they approach their work, and prices continue to increase. Landlords may think they are feeling the shift in demand now, but they will experience the change even more later this year due to high-end apartments.