Relief is in sight for cash-strapped renters, according to Zillow’s rental forecast.
Rent appreciation is expected to level off over the next year, slowing to an annual rate of 1.1 percent by December 2016, the forecast reports. The national Zillow Rent Index is projected to be $1,396 at the end of 2016, compared to $1,381 in December 2015.
In Boston, rents are forecasted to appreciate by 2.75 percent and have increased by 6.6 percent over the past year. The median rent at the close of 2015 was $2,247 and is expected to increase to $2,309 over the course of the year. Home values rose 5.6 percent to a Zillow Home Value Index of $382,900 at the end of 2015.
Even with the anticipated national rental appreciation slowdown, rents will remain unaffordable in many of the major markets across the U.S., especially on the West Coast. Renters in San Francisco and Los Angeles can expect to spend 40 percent of their income on a rental payment, Zillow reports.
“Hot markets are still going to be hot in 2016, but rents won’t rise as quickly as they have been,” Zillow Chief Economist Svenja Gudell said in a statement. “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 meeting the demand. New housing supply is expanding in Atlanta, Denver, Portland, Seattle and other markets.
The Zillow Home Value Index rose 4 percent year-over-year in December 2015, to $183,500, according to the Zillow December Real Estate Market Reports.