U.S. average rent growth saw a second consecutive month of continued growth in August, creeping up by an average of $1 to $1,463. However, on a year-over-year basis, rents decreased 0.3% in August, unchanged from July.
However, with millions of Americans unemployed, it’s still unclear what the remainder of the year will hold for the multifamily industry, according to the latest Yardi Matrix National Multifamily Report.
“Collections have yet to decline a material amount, but if unemployed Americans are left without additional stimulus in the coming months, we could see a different story play out in the fall and winter months,” states the report.
On a year-over-year basis, while national rents declined 0.3%, 108 of the 132 Matrix markets performed better than the national average in August. This leads Yardi Matrix experts to conclude that the larger markets with significant rent declines are bringing the national average down.
Of the top 30 markets, year-over-year rent growth is negative for 16 markets, which is slightly better than the 17 negative markets in July.
The three markets with the largest year-over-year declines remained the same as July: San Jose, Calif. (-5.5%), San Francisco (-5.1%), and Boston (-2.5%). Rents in San Jose and San Francisco have deteriorated rapidly since the start of the COVID-19 pandemic, seeing declines of $143 and $97, respectively. Rents in Boston have remained steady.
The best performer out of the top 30 markets in August was Indianapolis, which saw 3.5% year-over-year rent growth. In addition, comparing the best market in the top 30 with the other Matrix markets, 16 secondary markets performed significantly better than Indianapolis on a year-over-year basis. This includes Huntsville, Ala., at 5.7%; Boise, Idaho, at 5.1%; Fort Wayne, Ind., at 5%; Portland, Maine, at 4.9%; and Grand Rapids, Mich., at 4.4%.
The Lifestyle asset class continues to be hit the hardest, with rents decreasing by 1.3% on a year-over-year basis and 22 of the top 30 markets experiencing negative rent growth. However, the Renter-by-Necessity asset class has remained strong, with only eight of the top 30 markets experiencing negative rent growth.
On a month-over-month basis nationally, rents increased 10 basis points in August. San Jose and San Francisco again top the list with the sharpest declines month over month overall as well as the in the Lifestyle and Renter-by-Necessity asset classes. However, Southern California markets are faring well. Los Angeles and Orange County turned positive in August on a month-to-month basis and outperformed the best among the top 30 markets in the Lifestyle asset class. All Texas markets also showed month-over-month rent improvements, increasing to flat or positive from July.
Markets that flipped negative on a month-over-month basis in August include Austin, Texas, (-0.3%); Tampa, Fla., (-0.2%); and Seattle (-0.1%). According to the report, another factor that could be affecting declining rents in Austin and Tampa is the increasing homeownership rate.
“The homeownership rate for the second quarter of 2020 was 67.9%, an increase of 3.8 percentage points from the second quarter of 2019 and 2.6 percentage points higher than the first quarter of 2020,” states the report. “With interest rates at all-time lows, many multifamily renters who were thinking about homeownership down the line are speeding up their timelines to take advantage of low rates.”
The report also finds that tech hub markets have seen inconsistent rent growth on a month-over-month basis since the pandemic started, with negative rent growth one month and positive the next. Of the tech hub markets that performed better in August than July are Nashville, Tenn., (0.6%); Raleigh, N.C., (0.7%); and Portland, Ore., (0.7%).
