The national average rent rose by $3 in July 2018 as the market remains on its steady pace, up to an all-time high of $1,409, according to the latest Yardi Matrix Multifamily National Report. The average rent is up $41 this year to date, or 3.0% since January 2018.
At the national level, rents rose by 2.8% year-over-year at the national level, down 10 basis points from June 2018. The spread in rent growth between luxury Lifestyle and market-rate Renter-By-Necessity (RBN) properties has retreated in recent months, but remains a full 100 basis points wide, with RBN rents rising 3.3% YOY and Lifestyle rents rising 2.3% YOY.
Secondary markets with strong late-cycle economic performance led the nation in rent growth. Orlando’s YOY rent growth is strongest at 6.9%, followed by Las Vegas at 5.8%, the Inland Empire at 5.5%, and Phoenix at 4.9%. Tech economies have also experienced strong rent gains in the past three months, including San Jose, Calif., San Francisco, Seattle, Boston, and Portland, Ore.
The occupancy rate rose by 20 basis points, up to 95.3% for June 2018, marking a slight recovery from a 100-basis-point drop in 2016-2017. (All occupancy rate data is current as of the previous month.) Many of the markets with the highest supply growth in the nation have experienced a rebound in occupancy rates following declines in 2016 and 2017. Nashville, Tenn., for example, saw a 150-basis-point decline in its occupancy rate in 2017, but the rate has since recovered by 60 basis points in the first half of 2018.
On a trailing three-month (T-3) basis, which compares rent growth in the last three months to growth in the previous three months, rents rose by 0.6% at the national level. Of the top ten markets for T-3 rent growth, six are key tech markets. San Jose, Calif., took the top spot at 1.3%, followed by Seattle at 1.0%. San Francisco, Boston, Austin, Texas, (all 0.9%) and Denver (0.8%) came in further down the list.
The gap between RBN and Lifestyle rent growth has disappeared on a T-3 basis, and Lifestyle rent growth has actually outpaced RBN rent growth by 10 basis points in July 2018. According to Yardi analysis, this means that renters are increasingly willing and able to upgrade to higher-quality units as new supply continues to come in.
Despite still-rising supply and affordability issues in many markets, the sector’s growth figures have not suffered at the national level this month. Fundamentals, demand, and economic growth remain strong, according to Yardi, and unemployment remains historically low. However, headwinds are forming from tariffs and a lower bound to the unemployment rate.
“We anticipate continued steady growth for the apartment sector,” the report says, “but supply and macroeconomic challenges will likely limit outsize growth.”
