U.S. multifamily rents rose by $2 in February 2019, up to $1,426 on average, according to the latest Matrix Monthly report by Yardi Matrix. Year-over-year rent growth remains steady at 3.6%; January’s year-over-year rent growth has been revised upward from 3.3% to 3.6%.
This month’s YOY rent growth is the nation’s highest since late 2016, and overall growth has risen steadily since its low of 2.2% in the fall of 2017. Yardi considers this a sign of the strength of the apartment market’s fundamentals, despite uncertainty around the length of the cycle. Demand for multifamily housing remains strong, with wage growth rising to more than 3% and unemployment below 4%. Occupancy rates have fallen slightly, but absorption holds steady.
Southwest and West Coast markets with strong population and job growth have benefited the most this month. Phoenix saw the highest YOY rent growth this month at 8.0%, moving ahead of Las Vegas at 7.9%. Sacramento ranks third at 5.1%, almost 300 basis points lower than the top two markets. Portland, Kansas City and Houston are the only metros with less than 2.0% rent growth year over year.
The gap between Renter-by-Necessity and Lifestyle rent growth has begun to widen again as well. Luxury Lifestyle rents rose 2.9% YOY, and market-rate Renter-by-Necessity prices rose 4.1%.
On a trailing three-month (T-3) basis, rents rose by 0.1% across the country, which may indicate stronger rent increases to come in the first half of 2019. Phoenix led the nation on a T-3 basis with 0.5% year over year rent growth, followed by Charlotte and Sacramento at 0.3%. Only four markets experienced declines over this period: San Jose and Seattle (both -0.1%), Nashville (-0.2%) and Portland (-0.4%). Yardi attributes Portland’s decline to Oregon’s recent statewide rent control limits.
The U.S. home ownership rate rose to 64.8% in the fourth quarter of 2018, up from 64.2% one year earlier and from a low of 62.9% in the second quarter of 2016. All age groups saw an increase in home ownership rates year over year, apart from ages 65+, which fell by 40 basis points to 78.8%. Homeownership among 35-to-44 year olds made the largest leap, rising 220 basis points YOY to 61.1% in Q4 2018.
According to Yardi, this data aligns with the idea that older Millennials will increasingly leave rental housing and move into suburban homes to raise families. If this holds true, it could lead to a weakening demand for urban apartments – however, Yardi says, more significant and sustained data is necessary before any pronouncements can be made.
