The average rent for a D.C.-area Class A apartment dropped this year for the first time since 2002, as developers and homeowners caught in the housing downturn flooded the market with units that had once been for sale, a recent market report shows.
Rent for Class A apartments — those units in large, newer buildings with amenities like clubhouses or swimming pools — has dropped 0.8 percent region-wide over the past year, with high-rise apartments doing better than garden-style apartments, according to a third quarter report from Alexandria-based real estate research firm Delta Associates.
Rent forClass A and Class B apartments combined is up only 0.5 percent, significantly less than the region’s long-term average annual increase of 4.5 percent.
“The demand is still there,” said Grant Montgomery, a Delta Associates analyst, citing continued job growth and an increase in the number of potential homebuyers who are choosing to rent until the market improves. “But there are many more options for renters than there were even a few months ago.”
The so-called “shadow market” of homeowners and investors who are putting their houses and condos up for rent until the housing market recovers is driving up the supply if rental housing in the region, Montgomery said.
The firm doesn’t officially track those units, which are generally listed individually, but third-quarter numbers from the Northern Virginia Association of Realtors show an increase of more than 50 percent for such listings in Northern Virginia as compared to the same time last year.
Over the past 15 months, developers have also canceled about 120 condo projects, totaling more than 20,000 units, and turned many of them into rental projects. There are currently 30 new rental projects seeking leasers in the region, up from 19 a year ago, Montgomery said.
As is standard in the D.C. area, inside-the-beltway neighborhoods have felt less of an impact than their farther-out neighbors. In the District, where apartment vacancies are up only 1.8 percent from last year, rents have actually increased 6.5 percent.
Prices have dropped 1.2 percent in Northern Virginia, the region’s largest market, and have risen 2.2 percent in suburban Maryland.
“There is more of an increase in rent the closer you get to DC,” said Lee Wilkinson, a Realtor and property manager with HomeFirst Realty in Alexandria. “There is a limited supply in these areas, and it does tend to buffer them a little bit from price depreciation.”
WhileDelta Associates predicts that the slowdown in condo investments will help ease the condo rental supply, the firm reports that 33,749 new apartment units will hit the market over the next three years, a number that has almost doubled since 2005.
“The impact will be that vacancy rates are going to rise because there will be more supply than demand,” Montgomery said. “It will definitely flatten prices, and we’re projecting lower rent increases than our long-term average.”
