The Wall Street Journal reports that the seven-year long boom in luxury apartment development is about to fizzle out. Since early 2010, U.S. apartment rents have risen more than 26%—a pace much faster than either inflation or income growth. This pattern began to slow last year, when rents rose just 3.8%. Faced with a superabundance of new apartments that outstrips demand, landlords are prepping to cut rents and offer concessions. According to the report, landlords in Los Angeles are starting to offer free parking while developers in New York are offering up to three months free rent.
A couple of years ago, several emerging demographic patterns led to a rush to build new luxury properties. Most notably, in the post-housing crash market, young, high-earning professionals were less likely to buy homes and instead headed back to the city. But the boom outpaced demand, and now major cities are chock-full of fancy digs with not enough wealthy folks to fill them.
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