The word of the day is patience for the apartment market in the next decade, at least that’s what AxioMetric is telling suggesting to investors and renters in their recent forecast of the multifamily apartment market in Q1 2017. Representatives from all aspects of the apartment and student housing analysis service are suggesting that as soon as first quarter 2017 cities nationwide could see a drop in rent growth for the first time in quite a while. Stephanie McCleskey, AxiMetric’s vice president of research suggests that supply outpacing demand is a definite factor.

“The demand for apartments is just not there,” McCleskey explains in a article specifically focused on the Houston area apartment market, “With new properties being completed every month, they just won’t be filled as quickly as we would like to see until job growth picks up.” This anticipation of rent growth decline is also shared with McCleskey’s colleague, KC Sanjay who forecasts a steady decline coming in the near future. “Rents increased by 4.6% in 2015 and are forecast to rise another 3.4% in 2016… still nicely above the long-term average of 2.2%” he explained on a recent post to the AxioMetric’s website, “The market will likely fall slightly below that rate in portions of 2017, when 2.1% annual effective rent growth is expected.” Sanjay too attributes the sluggish rent growth to a quickly overwhelming supply market, citing the current and upcoming construction of over 609,000 units set to be completed by the end of 2017.

US Apartment Market FundamentalsThis leveling off effect may make for a decline in overall rent growth, but that doesn’t mean the decline will be some kind of dramatic dive. Instead McCleskey and Sanjay both suggest that the 2017 market will likely level off or drop slightly offering renter’s incentive to look for new housing options. For rental owners and developers, Sanjay has a piece of advice similar to that he gave to renters. Just be patient. Yes the dramatic growth cycles seen in 2014 and 2015 are likely slowing down, but it is also likely that another upturn is just around the corner. As proof, Sanjay produces a graph of U.S. Apartment Market Fundamentals dating as far back as 1997 and as far forward as 2021. It’s conclusion? A dip in rent growth and rise in new supply will quickly see a new swell around 2018. The market is always changing but the beat steadily goes on. “Patience over the next 1½ years is predicted to pay off in 2018, when rents are expected to rise 3.6%” Sanjay elaborates, attributing much of this rise to an inevitable decline of construction that will occur during the same year, “especially in 2019, when a 4.1% increase in rents approaches the pace of 2014 and 2015… [Then] expect another couple of years of moderation in 2020 and 2021.”

Lisa Brown’s Article “Axiometrics SVP Predicts 2017 Economic and Multifamily Recovery” can be found HERE.

KC Sanjay’s Article “The Latest Apartment Forecast” can be found HERE.