Apartment vacancy rates in the U.S. increased slightly in the first quarter to 4.7%, from 4.6% at the end of 2017, a 0.4% year-over-year change from the first quarter of 2017, according to the latest data from Reis Inc.
Year over year, average asking rents rose 4.4%, while average effective rents increased by 3.9% during the first quarter.
Reis reported net absorption at 27,875 units for the first quarter, below the average quarterly absorption for 2017 of 44,707 units. Construction also trailed the 2017 quarterly average of 58,824 units, with only 39,917 apartment units during the quarter. Reis noted that while the first quarter tends to see the least construction activity, the numbers are especially low given the current construction pipeline.
Of the 79 metros tracked by Reis, 49 reported increases in the vacancy rate in the first quarter, with all metros except for Chattanooga, Tenn., also posting an increase in effective rent growth for the quarter.
Metros that saw the sharpest vacancy decline included Tulsa, Okla.; Houston; Memphis, Tenn.; Palm Beach, Fla.; and Buffalo, N.Y. Metros with the lowest rent growth included Milwaukee; Columbia, S.C.; and Birmingham, Ala.
New York City posted effective rent growth of 0.3% from the previous quarter and 1.3% over the previous 12 months, putting it in the bottom 10 for quarterly effective rent growth and the bottom five for yearly effective rent growth. New York City's vacancy rate came to 5.5% in the first quarter.
The U.S. apartment market slowed at the end of 2017 as the domestic housing market started to improve, but Reis noted that the apartment market should shift in the second quarter because the U.S. housing market has stalled. Reis attributed the likely shift to the federal tax overhaul, which doubled the standard deduction and cut the deductibility of state, local and property taxes, lowering the incentive to buy a home.