Multifamily Rent Growth Steady in July

Multifamily rent growth was virtually flat in July, but the multifamily market remained healthy overall, YardiMatrix and Axiometrics reported.

Average U.S. apartment rents rose $1 to $1,350 between June and July, the YardiMatrix July Rent Survey said. On a year-over-year basis, rents were up 2.6 percent nationwide. Actual rents have increased every month this year and are up 2.7 percent year-to-date.

“Despite the marginal increase in July, and although we expect the rent gains to slow down in the second half [of 2017], the survey paints the multifamily market in a good light,” YardiMatrix said. “For one thing, rent growth tends to moderate in the second half of the year, and the gains achieved so far in the year already put 2017 above the average long-term increase.”

The report also noted the multifamily market is in an extended period of rate-growth deceleration from “unsustainably” high rent increases that reached as high as 5.7 percent in early 2016.

“Another positive sign is the broad-based stability among metros,” YardiMatrix said. Only one market–Houston–of the top 30 metros showed negative year-over-year results and 19 reported increases exceeding 2.0 percent. The research firm called more recent results encouraging as well: over the last three months none of the top 30 markets reported negative numbers and 25 of the top 30 metros saw gains exceeding 0.4 percent. “With few exceptions, metros are seeing outsize gains at best and moderate gains at worst,” the report said.

Absorption continues to drive fundamentals, YardiMatrix said. “There has been little slowdown in job growth this year despite the inability of Congress to implement new federal policy. New jobs are helping to fuel household formation that drives demand for apartments. That is keeping occupancies near historically high levels even though new supply is expected to hit a cycle high of 360,000 in 2017. The downside of new completions includes increased concessions for high-end units and growing vacancies in some submarkets.

Axiometrics Real Estate Analyst Carl Whitaker noted that national multifamily occupancy rates remain quite strong, “but not quite as strong as they were a year or two ago, when they were at their peaks,” he said.

Apartment occupancy dropped 25 basis points between June 2016 and June 2017. But Whitaker said broad national views do not necessarily paint the whole picture. “In other words, saying that all markets across the nation are experiencing softening occupancy rates would be misleading,” he said.

Whitaker said occupancy rates in most major markets may not return to their peak level this year. “However, it is important to bear in mind that occupancy rates are still healthy in almost all major markets,” he said. “Furthermore, the trend in a select few markets such as Denver and San Jose [Calif.] may suggest these previously sluggish markets are beginning to improve from their 2016 troughs.”