The arrival of summer typically means higher temperatures and higher rents – and this summer is no different. Led by strong growth across the sun belt, the U.S. rental market shows little indication of slowing down.
Of the top 10 fastest appreciating rental markets, nine are located in the sun belt, with the sole exception being Salt Lake City. Phoenix continues to lead the nation in rent growth, with rents 6.9% higher than the same time last year. That’s closely followed by Las Vegas, where rents have risen 6.8 percent over the same period.
At the national level, rents have continued their march upward, ticking up 3.2% annually this quarter compared to 3.1% the period before. Rent appreciation has been on a steady upward trajectory since this past December, which suggests this climb is not close to being over.
On the flip side, Houston became the slowest rental market in the country this past quarter. The metro saw its rent appreciation fall by 20% since last quarter – rent appreciation is at 1.4% now, was at 1.8% last quarter, and was at 2% as recently as January.
Meanwhile, New York and Baltimore continue to be some of the fastest-changing markets in the nation. Although both metros are still among the five slowest-growing markets, both have seen year-over-year appreciation increase by more than 20% in the past quarter. This growth helped them rise from the bottom of the rankings, where they’d been since last June.
Like New York and Baltimore, Virginia Beach and Oklahoma City also rank among the rental cities with the slowest rental appreciation. However, both have been experiencing increasing rates of appreciation and should continue to climb upwards.
From a macroeconomic perspective, factors of demand and supply support predictions that the rental market in the U.S. will continue to pick up.
On the demand side, the U.S. labor market has been somewhat of a mixed bag lately, but it remains strong overall — there are no major indications that the robust labor market the nation has enjoyed is going anywhere fast. Wage growth has picked up considerably in 2019, reaching 3.7% in its most recent reading – just below the nation’s post-recession high of 3.9% from fall 2016. On the other hand, year-over-year employment growth has fallen since January but is still above the lows experienced in late 2017 and early 2018.
On the supply side, building permits are down slightly from last year and have been remarkably stagnant for the past 30 months. The stagnation of building permits over that period combined with the strength of the U.S. labor market helps explain the pickup in rents we have seen since late 2018 and offers more credence to predictions of sustained growth throughout the rest of 2019.