After growing at a blistering pace for much of 2015, apartment rents across the county are growing at a slower pace thus far in 2016, according to the data from real estate firm Zillow.

Overall, apartment rents nationwide grew by 3.6% for the year ending in April 2016, almost 2% points slower than the 5.4% pace reported for the year ending in April 2015.

And in 23 of the nation’s 35 largest housing markets, the slowdown in rent appreciation has been more acute in luxury ZIP codes area than metro-wide.

In four additional markets of Washington D.C., Sacramento, Miami-Fort Lauderdale, and Kansas City broader apartment rent growth has accelerated from 2015, but it has accelerated less in luxury ZIP codes than in the metro as a whole.

Aaron Terrazas, a senior economist at Zillow, said that substantial investment in new construction, particularly at the high end of the market, has contributed to some of this pattern, although in some areas weak labour markets may also be a contributing factor.

The research also shows that in the Houston metro, essentially all ZIP codes where the median rent per square foot is above $1.10 have experienced a deceleration in apartment rents. In the New York metro, the natural cut off appears to be closer to $2.30 per square foot and in the San Francisco metro, it appears to be around $3.80.

The exception is the Seattle metro, where higher apartment rent growth continues to accelerate in luxury ZIP codes, although the acceleration has perhaps not been as dramatic as lower priced ZIP codes. Terrazas explained that part of this is due to rapidly rising rents in neighbourhoods north of Seattle’s Lake Washington Ship Canal.

Meanwhile, the latest national index produced by Florida Atlantic University and Florida International University shows that housing market as a whole is moving deeper into buy territory, suggesting that, on average, residential housing markets around the country are sound.

The Beracha, Hardin & Johnson Buy versus Rent (BH&J) Index measures the relationship between purchasing property and building wealth through a build-up in equity compared renting a comparable property and investing in a portfolio of stocks and bonds.

It says that in terms of wealth creation the US housing market, when considered as a whole, has swung marginally more in favour of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds. Overall, 16 of the 23 metropolitan markets investigated moved in the direction of buy territory.

The metro areas of Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia and St. Louis remain solidly in buy territory.

‘These cities should have room for price growth without much worry of overheating,’ said Eli Beracha, co-author of the index and assistant professor in the T&S Hollo School of Real Estate at FIU.

He pointed out that this is especially true for Chicago, Cincinnati, Cleveland and Detroit while cities such as Honolulu, Kansas City, Los Angeles, Miami, Pittsburgh, Portland, San Diego, San Francisco and Seattle are hovering around the indifference point between buying versus renting.  In almost all of these metro markets, the BH&J Index score for the quarter moved in the direction of ownership.

‘This movement suggests that most consumers in these markets appear to have learned from the real estate crash and now understand that residential property prices can get too high,. This is a good sign for future housing price stability in these markets,’ Beracha explained.

Meanwhile, two hot housing markets, Dallas and Denver, continued to move deeper into rent territory but at a slower rate than earlier quarters, said Ken Johnson, a real estate economist who is one of the index’s authors and an associate dean of graduate programmes and professor in FAU’s College of Business.

‘Strong economic support within these two markets should make for a soft landing in terms of slowing property price growth, increased marketing time for properties and lower probabilities that sellers will actually transact and close during a given marketing effort of their property,’ he added.

One particular market, Houston, continues to cause concern. Houston was already deep into rent territory, and its recent BH&J score plummeted significantly toward buy territory, a scenario that has foreshadowed noticeable property price declines in the past.

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