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US apartment rent growth slows in Q4 but fundamentals are strong, Reis says

U.S. apartment rent growth slowed in the fourth quarter, but occupancy has continued to keep pace with new supply, Reis Inc. said.

The data provider said the apartment vacancy rate was unchanged at 4.8% in the quarter, while asking and effective rent both grew at 0.8% — down from 1.4% and 1.3%, respectively, in the third quarter. The nationwide vacancy rate was 4.6% at the end of 2017 and 4.2% at the end of 2016.

The number of new units constructed in the 79 metropolitan areas Reis assessed, 49,994, was down from the third quarter's total of 62,313 and below the 2017 quarterly average of 61,869. There were vacancy rate increases in 40 metropolitan areas, largely stemming from high levels new construction. Among the markets with the largest vacancy increases were Denver; Albuquerque, N.M.; and Nashville, Tenn.

The localities with the highest effective rent growth from the previous quarter were Albuquerque; Charlotte, N.C.; Philadelphia; Phoenix; and Atlanta. The only three metropolitan areas to post declines in effective rent were Hartford, Conn.; San Francisco; and Syracuse, N.Y.

San Francisco's effective rent growth for the year was 2.8%, and New York City's was 3.1%. Metropolitan areas with the highest effective rent growth for the year were Phoenix, at 8.4%; Las Vegas, at 8.1%; Atlanta, at 7.5%; and Denver, at 7.0%.

In a release, Reis Senior Economist Barbara Byrne Denham said job growth has supported apartment demand, while a weaker housing market has bolstered the rental market. New construction is expected to remain robust in 2019 before completions drop off in 2020, though stronger demand for apartments could push developers to build more, prolonging the construction cycle, Denham said. Nevertheless, she added, the apartment industry's recent momentum should keep rent growth positive.