Average effective rents grew 3.6% during the second quarter compared with a year earlier, according to real-estate research firm REIS Inc. The pace of rent growth has been rising rapidly since 2012 and has hovered around 4% since then. The last time rents fell was the fourth quarter of 2009.
Hot technology markets, including San Jose, Calif.; San Francisco; and Denver, continued to see the biggest increases. In San Jose, rents increased 7.2% from the second quarter of 2014 to $1,951 a month, while in San Francisco they increased 6.8% to $2,316.
New York City—the country’s most expensive rental market—also saw a pickup in its rental market after a slightly sluggish winter. Rents in New York increased 1.7% over the prior quarter to $3,294 a month from $3,233. That was the second-biggest quarterly increase of any city other than San Jose.
Ryan Severino, senior economist at REIS, said that so far there hasn’t been enough new supply to cause downward pressure on rents. “I called it Armageddon deferred,” Mr. Severino said. “We’re waiting for the supply to come on the market but it just hasn’t hit yet.”
More than 44,000 units were finished in the U.S. during the quarter. REIS is expecting 230,000 units to be completed this year, meaning that some 150,000 new units could be finished in the last six months of this year—roughly twice normal levels.
The apartment vacancy rate in the second quarter was 4.2%, around the same level at which it has been hovering since the second quarter of 2013. Economists said that as new supply comes online the vacancy rate and rent growth will likely start to ease.
“We’ll probably see rent growth begin to decelerate,” said Stephanie McCleskey, vice president of research for Axiometrics.
Zach Johnson, a 28-year-old tech startup founder in Santa Monica, Calif., said that he spent months bouncing from short-term apartment to short-term apartment, often paying his rent in cash. He finally found a place that he shares with two roommates for $1,100 a month.
He said that he avoided living in San Francisco when moving to the West Coast, in part because of the tight rental market.
Mr. Johnson had moved from Utah, where he was paying closer to $500 a month. “It could push me back there soon, who knows?” he said.
Still in many of the hottest markets, developers and renters said that they are seeing little sign of a slowdown, especially for new buildings. At the upscale 1400 Hi Line apartment building near downtown Dallas, owner PM Realty Group saw a strong flow of would-be renters in the second quarter to the point of increasing rents by 2% to 2.5%.
Rents in the 24-story complex average $2,500 to $2,600 a month, with penthouses renting for as much as $6,300.
Overall, Dallas rents grew 5% year-over-year—the fifth-fastest of any metro area in the country, even though the city has seen job growth taper slightly with the decline in the oil sector.
“We’ve seen a definite uptick in traffic,” said Bryant Nail, an executive vice president at PM Realty. “We’ve been able to push rental rates quite a bit in the second quarter, so it’s been very positive.”