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San Francisco rent growth slows in August as inventory climbs

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The Yardi Matrix U.S. Multifamily Outlook for fall 2016 found that national rent growth has continued but slowed, while a couple bursts of job growth has helped propel the market forward.

Covering 110 markets throughout the nation, the Yardi Matrix report has detailed ownership, construction and loan data from 65,000 multifamily properties. Although forecasters predicted a more active year for economic growth, 2016 rents increased strongly in August, at 5 percent year-over-year. However, trends are slowing, as growth surpassed 6 percent for the majority of last year.

Construction was also strong, the report shows. In 2016 360,000 units are set to be delivered– a 45 percent increase over the previous year. The majority of markets are reporting quick absorption of new housing stock, but some, such as Houston, are struggling to keep up the pace.

This new stock could also be having an impact on the slowing of rent growth. Nationally, multifamily rents were down 50 basis points month-over-month in August and 170 basis points from the last peak, which was in October 2015.

Some markets are still seeing growth in big figures. Sacramento saw year-over-year rent growth in August 2016 at 11.9 percent, and its 2016 rent forecast is 10.1 percent. And while Sacramento is leading in forecasted rent growth, Tacoma saw the biggest annual jump in August, at 12.7 percent.

Most markets are going to continue to trend in a positive direction, as millennials and baby boomers continue to fuel the rental economy. Occupancy rates reached near all-time highs of 95.9 percent in July, but this figure is expected to cool a bit as new supply continues to be deli

[Tweet “San Francisco’s annual rent growth was only 1.6 percent in August”]

Surprisingly, San Francisco had one of the nation’s lowest rates of annual rent growth in August, at 1.6 percent. However, for the entire year, Yardi still sees 2016 as a solid one for the City by the Bay. The report forecasts rent growth at 6.5 percent by the end of the year.

San Francisco is also home to a large expected influx of inventory, according to a report. Ranking in the no. 4 spot nationally for total new completions, San Francisco is expected to see a total of 15,292 new completions this year, which is 4.3 percent of the total rental stock.

New home construction in the U.S. is still chugging along with strong figures, the report shows. Housing starts reached an annualized rate of 1.2 million units in July. Of the forecasted 360,000 new multifamily units expected to be delivered in total this year, 162,000 units have been completed.

And while occupancy rates are expected to be impacted by this large delivery, rent rates may not budge much. Builders continue to lean toward high-end lifestyle renters, Yardi says, making it more challenging for the renter-by-necessity to find an affordable place.

Email Kimberly Manning