CoStar Market Insights: A Closer Look at the Seasonal Effect on Apartment Rents
SEPTEMBER 13, 2019|DAVID KAHN
With recent record-setting heat in many parts of the country, it may not feel like fall, but the signs that autumn is fast approaching are all there: Schools have reopened, football has kicked off another season and apartment rents are soon expected to enter their annual seasonal slowdown.
In many locations, apartment rents typically enter a period of flat, or even negative, rent growth in the fall. As observed in the CoStar daily rent series, apartment rents gradually rise from January to August and then they typically flatten or fall slightly through December.
Factors that likely account for the ebb in apartment demand each fall include families preferring to avoid moves during the school year, shorter days and declining weather conditions.
This trend is also apparent in the average nationwide rent growth. In the first half of any given year since 2015, apartments in the U.S. increased by an average of 2.6%, while the average growth in the second half of the year was 0.6%. That’s the difference between exceptional 5.2% annual rent growth and anemic 1.2% growth.
Part of the reason 2015 was the strongest year for rent growth since the end of the recession was that it proved to be the exception to this rent seasonality trend. Average apartment rent growth was unusually strong in the third and fourth quarters of 2015. In fact, growth in the second half of 2015 was stronger than that in the second half of 2016, 2017 and 2018 combined.
Some markets see more of this seasonal effect on apartment rents than others. For example, tech-driven markets appear to be more prone to seasonality.
Cities such as Denver, Seattle, San Jose in California and Portland in Oregon have seen the largest seasonal effect in recent years.
In comparison, the South Florida markets of Miami, Fort Lauderdale and Palm Beach have not experienced much of a seasonal effect in recent years. In fact, Palm Beach is the only major metropolitan region in the country that has seen a reverse seasonal effect, with rent growth customarily stronger in the second half of the year than in the first half. This may reflect the impact of “snowbirds” fleeing the Northeast for warmer locales in the winter.
Meanwhile, many of the country’s high-growth regions, specifically late-recovery Sunbelt locales, such as Phoenix, Las Vegas, Sacramento, and California's Inland Empire, do see a seasonal effect. However, they all rank toward the middle of the pack in this metric because their second halves of the year push rents at a strong pace, albeit not quite as strong as their torrid first halves.
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Article by CoStar