The price of rent in New York City and San Francisco is falling, according to housing provider Equity Residential.
The firm now projects a revenue increase of 4.0% to 4.5% for 2016, down from the original estimation of 4.5% to 5.0%.
“The revision is being driven by continued weakness in its New York portfolio and recent underperformance in the company’s San Francisco portfolio,” a release from Equity Residential said.
“While occupancies and renewal rates in these markets continue to perform in line with the company’s expectations, new lease rates are not meeting original projections due to new rental apartment supply.”
Housing supply is suffering in many parts of the country but the firm believes San Francisco and New York City have experienced an increase in supply that is slowing price increases.
The massive amount of building in these metro areas was also pointed out by Michelle Meyer, an economist at Bank of America Merrill Lynch.
“In particular, the New York and San Francisco metro areas, which tend to have a higher concentration of luxury buildings, made up 11% of apartment construction since 2010,” Meyer wrote.
“To put this into perspective, from 1995- 2005, these two metro areas made up 7% of apartment construction.”
The price of rent is expected to slide slightly over the next year in both cities.