California once again dominates the list of rent-growth leaders for the coming year, with more than half of the top markets, but it may come as a slight surprise to some.
Oakland tops the list, with San Francisco and San Jose still in the top 10. Oakland’s rent-growth pace has slowed significantly recently, and San Francisco and San Jose are both experiencing rent cuts. There’s been a lot of fear about oversupply in these markets, which could be contributing to the current situation. The Bay Area economy has experienced a notable decline recently, but its job-addition volumes are substantial.
“[Apartment operators] will pretty quickly realize that the [Bay Area] market hasn’t gone off the edge of the cliff, regaining some confidence on pricing power,” says Greg Willett of MPF Research.
The continued above-average growth in these California markets is good news for business, but it’s squeezing renters more than ever. A one-bedroom unit in San Francisco in October rented for $3,373, on average, which is slightly more than half the area median income monthly paycheck after taxes, according to real estate listing site Rent Jungle.
Las Vegas is the second rent-growth leader for next year, at 6.1%, just behind Oakland. The metro was hit hard by the recession but has experienced improved growth in the past 18 months that makes it a great market going forward. Seattle; Dallas; Nashville, Tenn.; and West Palm Beach, Fla., are the other markets defined as rent-growth leaders for the coming year.
Absent from 2016 are Portland, Ore.; Fort Worth, Texas; Atlanta; and Phoenix, which all are expected to come in just under the cutoff of 4%.
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