U.S. multifamily rents rose by $5 to $1,442 in May 2019, marking a $14 rise over the last three months, according to the latest Matrix Monthly report by Yardi Matrix. At the same time, year-over-year rent growth fell by 50 basis points, down to 2.5% for May.
Rents have risen 1.2% this year to date—the lowest rent growth recorded for this period since 2011, and the first time since 2017 that rent growth failed to reach 2% over the first five months of the year. While recent rent gains are in line with long-term averages, Yardi notes that 2019’s performance is looking weaker than in previous years; year-over-year rent growth has fallen 80 basis points over two months and 110 basis points over three.
Phoenix pulled ahead of Las Vegas for year-over-year rent growth in May at 6.8%. Las Vegas is next at 6.6%, followed by Sacramento at 4.1% and Atlanta at 3.9%. Out of the major metros, very few have experienced less than 1.5% rent growth year over year. Houston ranks lowest in rent growth out of the nation’s major markets at 0.4%.
Occupancy levels of stabilized properties have fallen by 30 basis points, down to 94.9% year over year through April. (Occupancy rates are current as of the previous month.) Yardi notes that supply growth has affected occupancy in some markets, including Houston, where the occupancy rate fell more than 100 basis points to 92.4% in April.
Rents rose by 0.3% on a trailing three-month (T-3) basis, which compares the last three months with the previous three months, with no change from the previous month. Lifestyle and Renter-by-Necessity rents grew at the same rate—0.3%—bucking the recent trend of RBN rents rising faster than lifestyle rents.
Seattle leads the nation with 0.6% rent growth on a T-3 basis, while Nashville, Portland, Ore., Phoenix, and Las Vegas come in second at 0.5%. Yardi notes that Phoenix and Las Vegas have seen strong rent growth for several years, but other markets have moved up and down the rent growth tables over time. Seattle (0.8% YOY), Nashville (2.6% YOY), and Portland (1.2% YOY) all have strong growth fundamentals and heavy supply pipelines, which influence an inconsistent rate of rent growth.
The 10-year Treasury rate has fallen below 2.1% in the first week of June, down from a cycle high of 3.2% in October. It has now fallen below the three-month Treasury rate. At the same time, the National Association of Business Economists has released a survey showing an increasing number of analysts predicting a recession in 2020.
Eighty-eight percent of economists surveyed are downgrading growth forecasts based on president Trump’s trade policies, including tariffs on Chinese and Mexican goods. Yardi notes that beyond the disruption to trade, the long-term effects of shifting U.S. negotiating positions has left businesses unable to form long-term plans to handle them, and inflation in construction materials has made affordable housing more difficult to build. Despite these conditions, Yardi says that this is not certain bad news for commercial real estate, which has “typically prospered in low rate environments.”
