The average U.S. monthly multifamily rent rose by $5 in January, to $1,315, marking the first increase for the average monthly multifamily rent since August 2016, according to Yardi Matrix’s Matrix Monthly multifamily rent survey. Nationwide, rents rose by 4.6% on a year-over-year (YOY) basis in January. This is a 30 basis point (bps) increase from December 2016 but a 240 bps decrease from January 2016’s recent high of 7.0%.
(Beginning with this month’s Matrix Monthly multifamily rent survey, Yardi Matrix has changed its survey methodology in order to incorporate more recent-vintage properties and increase the accuracy of its reports. This has resulted in slight changes in Matrix Monthly’s overall rent and YOY growth numbers.)
Sacramento, Calif., once again leads the nation in rent-growth rate, with 10.5% rent growth YOY. Seattle is next on the list, at 8.4%, and Yardi notes that this market’s high demand has offset its large amount of new supply. Out of the 15 metros with higher rent-growth rates than the national average, all except Minneapolis are in West and South population centers. Houston and San Jose, Calif., are the only metros with rent-growth rates below the long-term average of 2.7%, at 0.7% and 0.9%, respectively.
On a trailing three-month (T-3) basis, multifamily rents grew by 0.1% in January, a 10 bps increase from December. The “Renter by Necessity” (RBN) segment—defined by renters who cannot own homes for financial or practical reasons—grew by 0.1%, whereas the "Lifestyle" segment—defined by renters with enough wealth to own who choose to rent—was flat. Half of the 124 markets Yardi surveyed reported rent declines in the Lifestyle sector, compared with just a fifth in the RBN sector.
In terms of individual market performance, the Twin Cities led T-3 growth, at 0.5%, in January, an exception to the usual seasonal trend of Sun Belt cities taking the top T-3 spots. Portland, Ore., saw a 0.3% T-3 decline, followed by San Francisco; Charlotte, N.C.; and San Diego, all with 0.2% T-3 declines.
The occupancy rate for stabilized properties fell slightly, to 95.6% in November 2016, a 10 bps drop. RBN property occupancy remained flat, at 95.8%, while Lifestyle occupancy fell 20 bps, to 95.3%.
Yardi attributes the year’s “robust start” to the market’s ongoing positive demand drivers, including the increase in renter households among millennials and baby boomers, as well as healthy economic activity and improvement in employment growth. The survey predicts that these trends will continue over the next several years, though concerns about supply remain.
About 320,000 units are expected to be delivered this year, which may lead to a deceleration in rent growth in many metros, despite strong absorption and high occupancy, Yardi notes. Nashville, Tenn., will be adding the greatest amount of supply to its stock, at 5.7%, followed by Seattle and Miami, at 5.5% each.
