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U.S. Apartment Rents Decline in Fourth Quarter, Bucking Annual Trend

Average Rents for U.S. Apartments Posted One of the Weakest Fourth Quarters Since the End of the Recession, Falling into Negative Territory After Posting Strong Growth Through the First Half of the Year in 2015
January 7, 2016
U.S. apartment rents posted one of the weakest fourth quarters since the end of the most recent recession, according to the latest analysis of the U.S. multifamily market by CoStar Group.

In the first six months of 2015, U.S. apartment rents grew at an annualized rate of 9.4%, per CoStar’s same-store analysis of more than 50 million rent observations. The growth rate slowed to just 2.7% in the second half of 2015, and turned negative over the final three months of the year. Taken together for the full year, U.S. apartment rents grew by an average of 6% in 2015.



"Our latest analysis confirms the historically strong growth in apartment rents over the first half of the year has given way to one of the weakest fourth quarters on record," said Andrew Florance, founder and CEO of CoStar Group. "We’ve always observed seasonality in apartment rents, but the downturn over the last three months of the year is certainly a noteworthy occurrence and one that would not be apparent in a year-over-year comparison. While it may be too soon to declare this a trend, it certainly bears watching."

Several of the nation’s largest apartment markets, many of which have seen record levels of construction and rent growth far outpacing income gains, experienced rent declines during the fourth quarter of 2015. Most notably, San Francisco (down 1.7%); Washington, DC (down 1.1%); Houston (down 0.5%); Philadelphia (down 0.3%); Seattle (down 0.2%), and Chicago (down 0.2%) all posted fourth quarter apartment rent declines.

Other high-growth markets, such as San Jose (down 2.7%) and Denver (down 1.0%), also saw average apartment rents decline.



According to CoStar’s analysis, newer, higher quality apartment properties, much of them built since 2010, bore the brunt of the fourth-quarter rent decline, falling by an average of 0.6%. Mid-quality, 3-Star apartment assets saw apartment rents decline by an average of 0.2% in the fourth quarter of 2015, while 1- and 2-Star assets continued to post strong average rent growth of 0.4% for the fourth quarter.

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