HOUSTON, TX. – After months of rent increases thanks to the booming economy many experts are predicting that rents will start to flatten out in 2016 and the rapid increases that we’ve seen over the last 12 months will soon become a thing of the past.
This is good news for the Houston Rental Market since the area has certainly been hit hard since the drop in oil prices but the question is will slower rental appreciation actually help renters since rents have been increasing faster than incomes over the last 24 months?
National median rent at the end of 2015 was $1,381, and is expected to increase slightly to $1,396 over the next 12 months.
The slowdown in rents means that, by the end of the year, they will be rising at a slower pace than incomes in many markets.
In December, home values rose 4 percent to a Zillow Home Value Index of $183,500.
Rent appreciation will level off over the next 12 months, slowing to an annual rate of 1.1 percent by December 2016, according to the new Zillow® Rent Forecasti. The national Zillow Rent Indexii at the end of 2016 is projected to be $1,396 — compared to $1,381 in December 2015.
Zillow is forecasting a decrease in the rate of rental appreciation amid a rental affordability crisis that has renters in some markets spending almost half of their income on rent. Some of the fastest growing metros had double-digit annual rental appreciation at the end of 2015.
Zillow expects rental appreciation to slow down most significantly in Nashville, Tenn., San Francisco, Portland, Ore. and Denver. Rents in San Francisco saw 12.5 percent appreciation in 2015. Zillow forecasts rent in San Francisco will grow half as fast in 2016 — 5.9 percent.
Even with the slowdown, rents will remain unaffordable in many of the major markets across the U.S., especially on the West Coast. Renters in San Francisco and Los Angeles can expect to spend 40 percent of their income on a rental paymentiii.
“Hot markets are still going to be hot in 2016, but rents won’t rise as quickly as they have been,” said Zillow Chief Economist Dr. Svenja Gudell.
“The slowdown in rental appreciation will provide some relief for renters who’ve been seeing their rents rise dramatically every single year for the past few years. However, the situation remains tough on the ground: rents are still rising and renters are struggling to keep up.”
The slowdown in rental appreciation indicates that supply of new multi-family homes is catching up to demand. Substantial new housing supply is becoming available in Atlanta, Denver, Portland, Seattle, and other markets.
The Zillow Home Value Index rose 4 percent year-over-year in December 2015, to $183,500, according to the Zillow® December Real Estate Market Reports.
Source – rentalhousingjournal.com
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