After a three-year period of rapid growth, rents are likely to flatten in 2016, according to a new report. By December, year-over-year rent increases will have slowed to 1.1 percent across the U.S., according to projections published on Friday by Zillow. That follows a three-year period during which rents grew more than 3 percent each year.
Rent growth is probably easing now because construction of new apartments—which lagged considerably during the last recession—is catching up with pent-up demand. Apartment vacancies increased in the last two quarters of 2015, the first time since 2009 that vacancies went up for consecutive three- month periods.
While rent growth is slowing nationwide, not all markets will get significant relief. Zillow expects rents to drop in a number of Midwestern cities, which are generally more affordable for renters and buyers than the costly coasts.
But rents in West Coast cities such as San Francisco, Seattle, and Portland, Ore., are likely to outpace the national trend. In San Jose, Zillow expects rents to increase 8 percent, the heftiest hike in the U.S. That’s hard news for apartment hunters, but an improvement from 2014, when rents in San Jose increased 18 percent.
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