SEATTLE—Rent appreciation will level off over the next 12 months, slowing to an annual rate of 1.1% by December 2016, according to the new Zillow Rent Forecast. The national Zillow Rent Index 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 and San Francisco, as well as Portland and Denver. Rents in San Francisco saw 12.5% appreciation in 2015. Zillow forecasts rent in San Francisco will grow half as fast in 2016--5.9%.
Even with the slowdown, rents will remain unaffordable in many of the major markets across the US, especially on the West Coast. Renters in San Francisco and Los Angeles can expect to spend 40% of their income on a rental payment.
"Hot markets are still going to be hot in 2016, but rents won't rise as quickly as they have been," says 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 multifamily homes is catching up to demand. Substantial new housing supply is becoming available in Atlanta, Denver, Portland, Seattle, and other markets.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
