Average U.S. multifamily rents rose by $4, to $1,371, in March, marking the largest single-month increase in the national average rent since last summer. At the same time, rent growth fell by 10 basis points (bps) on a year-over-year (YOY) basis, down to 2.5% in March.

Yardi Matrix considers the market’s performance “decidedly mixed” in the past month, according to the latest Matrix Monthly report. Before March, the national average rent hadn't risen or fallen more than $1 since July 2017, and the growing average rent stands out against an overall trend toward deceleration. However, concerns about peaking supply, affordability, and falling occupancy rates remain. About 620,000 new units have been added to the nation’s housing stock over the past two years, and the occupancy rate has fallen by 100 bps over the same period.

In addition, Yardi notes that the first quarter’s rent-growth performance was the smallest for any first quarter since 2011, at 0.4%. This marks a significant departure from the past three first quarters, when rent gains averaged 1.0%.

All of the top 30 markets in the Matrix Monthly report experienced YOY rent increases. Orlando, Fla., remains the top major metro for rent growth, at 7.0%, after surpassing Sacramento, Calif., which ranked second in March, with 6.4% rent growth. Las Vegas came in third, with 5.2% rent growth in March, followed by California’s Inland Empire, with 4.4% rent growth.

The nation’s "Renter-by-Necessity" (RBN) properties experienced 3.2% YOY rent growth, while "Lifestyle" properties experienced 1.8% YOY rent growth. The 140 bps spread between the two asset classes is exacerbated by the glut of new high-end supply on the market, Yardi notes.

T-3 Performance
Rents rose by 0.1% in March on a trailing three-month (T-3) basis, which compares market performance in the past three months with that of the previous three months. Orlando had the strongest rent growth in March on a T-3 basis, at 0.6%, followed by Phoenix, at 0.5%, and Miami, at 0.4%. Yardi notes that March marks the beginning of the most active rental season, and that these warmer markets aren't as heavily affected by seasonality as other markets.

Rents declined in Raleigh, N.C.; San Antonio; and Austin, Texas, on a T-3 basis in March.

Occupancy has declined in 29 of the top 30 markets over the past 12 months. Houston is the lone exception, as its occupancy rate has risen 40 bps, to 93.6%, under the combined effects of Hurricane Harvey and the recovering energy market. San Antonio’s occupancy rate, meanwhile, has fallen 1.3% in the past 12 months, followed by Raleigh, at 1.2%, and Austin, down 0.7%.

Seven of these markets experienced occupancy drops of 100 bps or more in the past year, and Nashville, Tenn., and Seattle have both experienced rapidly slowing rent growth and occupancy drops of over 150 bps. New unit deliveries are expected to hit a cycle peak this year at 360,000, and, as such, Yardi expects occupancy to continue to decline.

Despite the weak first quarter, Yardi expects growth to continue over the next quarter in metros with job growth above the national average. Las Vegas and Orlando have experienced 2.9% YOY employment growth, and both metros ranked in the top 10 for population growth in 2017. Job growth is also up in Nashville, San Antonio, and Dallas, each at 2.7% YOY, and in Seattle, up 2.4% YOY.

Raleigh’s high levels of new supply and declining occupancy and rent growth as of late are belied by its 3.0% YOY job growth. Atlanta, with 2.6% YOY job growth, experienced one of the lowest occupancy declines in the country, at 40 bps. Yardi anticipates that short-term supply issues in these markets will be corrected by long-term demand.