Multifamily Rent Growth Rate Slides Again

U.S. multifamily rents increased in May–but their growth rate continues to decelerate–reported Yardi Matrix, Santa Barbara, Calif.

Average monthly apartment rents rose $4 to $1,316 in May, Yardi Matrix said. On a year-over-year basis, rents were up 1.5 percent nationwide in May, well below the 5.3 percent growth rate seen a year ago. “Deceleration is more than firmly established, as the year-over-year growth rate has decreased for 13 straight months,” the Yardi Matrix monthly Rent Survey said. “The last time the year-over-year increase was as low as 1.5 percent was in April 2011.”

Axiometrics, Dallas, noted that annual effective rent growth in May stayed almost exactly where it stood in April–and in the same general range it has been in since December. “This type of steadiness was last seen two years ago, when effective rent growth remained within an 18 basis point range,” Axiometrics Senior Vice President of Analytics Jay Denton said in the firm’s Market Trends report. In addition, more than 30 of the 50 largest metros saw rent growth changes in the +25 to -25 basis point range. “In other words, steady,” Denton said.

Yardi Matrix said several factors are driving the rent deceleration, including increased supply nationally and issues that vary by market including slowing demand and affordability. The firm expects 360,000 units to come online this year in addition to 281,000 new units delivered in 2016.

“Although the slowing rate of rent growth is not unexpected–coming as it did on the heels of several years of out-sized increases–the questions facing the market now include how low the rate of growth will go and how long growth will remain in the doldrums,” Yardi Matrix said. “The answers may well depend on how long the supply spigot remains open and how well the economy performs. We anticipate that supply will peak this year, although it will remain relatively robust in 2018 and 2019.

Axiometrics noted May occupancy was exactly 95.0 percent, the level the research firm considers peak occupancy because there will always be some unoccupied units due to moves, renovations and repairs. “May 2017 apartment market research shows that the sector once again has a full house,” the report said.

May represented the first time that occupancy reached 95.0 percent or higher since September 2016–the last month of a seven-month streak at those levels, Axiometrics said.

In addition to the overall national market, 30 metros among Axiometrics top 50 markets recorded 95.0 percent or higher occupancy rates in May, with 14 of those at 96.0 percent or more. 

“Most of the metros topping the occupancy charts also have some of the highest annual effective rent-growth numbers relative to the nation,” Axiometrics said. The top occupancy metros in May included Minneapolis-St. Paul, Minn., Nassau-Suffolk County, N.Y., and New York City. Metros that saw significant occupancy declines included Oklahoma City, Houston and Birmingham, Ala.