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Fall Predictions: Apartment Vacancies Rise With Rents Dropping in 2015

  • September 10th 2014

by UrbanTurf Staff

As fall approaches, there are a number of questions floating around about the DC area housing market. Will inventory continue to come online making it a buyer’s market? Will the slew of new apartments entering the rental market push rents down? Will mortgage rates head higher as experts have predicted?

With these questions in mind, each day this week UrbanTurf will be hearing the predictions and trends that local industry professionals believe will play out in the fall market.

Fall Predictions: Apartment Vacancies Rise With Rents Dropping in 2015: Figure 1
Apartment project planned for 1244 South Capitol Street.

Apartment Vacancies Will Inch Higher in the Fall and Rents Could Drop in 2015

By Rick Gersten, Founder of Urban Igloo

As apartment supply increases significantly and demand marginally grows across the D.C. area, rental vacancy will inherently increase in the third quarter. Historically, this occurs as the result of cyclical influences, along with other observable factors.

One of the primary prompts here is the region’s tendency to retract when economy and employment rates start improving across the balance of the country. We’ve seen this occur in the wake of previous recessions, and there are now indications this is trending – though slowly – causing effective rents to eventually drop.

The D.C. area is reaching the apex of its new apartment construction cycle. When coupled with decreasing employment rates, slower growth in the population of young renters moving into the area and a rise in home purchases, the growing apartment supply will generally exceed demand.

We expect rents will remain fairly stable through the end of the year. Over the next few months, rents in Class A buildings will hold and concessions will increase slightly based on occupancy. In the Class B buildings (especially buildings under rent control), rents will remain stable in the short term because of the competitive pressure from the larger Class A buildings. Unless renter demand begins to more evenly match supply, a mild rent drop could follow in 2015.

See more real estate predictions for fall:

This article originally published at https://dc.urbanturf.com/articles/blog/fall_predictions_apartment_vacancies_rise_as_rents_remain_stable/8952.

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