Multifamily Market ‘Springs to Life’ in March; Coastal Areas Face Affordability Issues
The volatile multifamily market perked up in March, with rents rising by 2.7 percent nationwide, reported Yardi Matrix, Santa Barbara, Calif.
A separate report from Zillow, Seattle, said where rental markets are hot, such as Seattle, rental affordability remains problematic, with renters forced to earn more to keep up with expected rent increases.
The Yardi Matrix survey of 121 markets said average U.S. monthly rents increased by $6 to $1,312. However, Yardi Matrix Vice President Jeffrey Adler noted the improvement probably reflects a seasonal trend, as households relocate when weather conditions become more favorable.
The report said overall rent growth remained relatively sluggish, coming in at half of the growth rate recorded from a year ago (5.4 percent). Rents have declined by 10 basis points since last February. Occupancy rates remain unchanged.
The report said Sacramento still leads as the strongest market for year-over-year rent growth, followed by California’s Inland Empire. Los Angeles, Seattle and San Diego round out the top five in all asset classes.
Adler said Yardi Matrix maintains a forecast of a 3 percent increase in rents for the year. “The economic climate may influence market projections,” he said.
Meanwhile, Zillow said U.S. renters would need a raise of about $168 a year in 2017 just to keep up with expected rent increases over the next 12 months as rental affordability concerns persist. The Zillow analysis said renters in Seattle, Los Angeles and Boston need annual income increases of more than $1,000 to avoid dedicating more of their paychecks to rent.
The projected increase comes on top of nearly five years of rising rents putting a dent in paychecks across the country, Zillow said. These income increases will only maintain the current amount of left over cash after paying rent.
Zillow said in several major metros, the share of income needed to pay rent already surpasses the general rule of not spending more than 30 percent of income on housing. In nearly all large markets, the median rent requires a larger share of income than it did before the housing bubble and bust.
“For a long time now, renters have faced an affordability crisis when it comes to housing, and renters in some hot markets will still need significant raises just to keep up with rising rents,” said Zillow Chief Economist Svenja Gudell. “Incomes have a ways to go to bring rental affordability closer to historical levels, but recent gains are being met with slowing rent appreciation, a welcome sign for renters.”
The report said housing affordability is still a significant issue for renters, who have experienced rising rents for years. In some markets, the median rent requires more than 40 percent of the typical household income. However, rent appreciation is slowing, and rents are predicted to rise just 1 percent over the next year.
