Yardi Matrix's newest Matrix Monthly survey of 120 multifamily rental markets shows that the average U.S. apartment rent has hit an all-time high for the eighth consecutive month. The new average monthly rent in August was $1,220, or $3 greater than July’s average.

The deceleration Yardi anticipated in July is starting to show itself in the slower average-rent growth rate. August’s average rate is up by 5% year over year but down 50 basis points (bps) from July, 110 bps from April, and 170 bps from October’s peak.

Many of the tech-heavy metros that boasted high growth rates back in 2015 are now “coming back to Earth due to the combination of waning demand and affordability issues in the face of growing supply,” according to the report. San Francisco’s 2015 12% growth rate has now slowed to 1.6% year over year as of this month, and Denver’s 11% growth rate has fallen to 3.5%. Austin, Texas, and Boston have also dropped by over four percentage points.

Eighteen of Yardi Matrix’s top 30 metros have still seen year-over-year growth of 4% to 7%, however. Sacramento, Calif., leads the way, with an 11.9% increase, followed by Seattle, at 9.3%, and California’s Inland Empire, at 9.2%.

The US national average rent month-over month, and the year-over-year rent growth as of August 2016, as tracked by Yardi Matrix.

Growth by Asset Class

For the purposes of its trailing three-month (T-3) and trailing 12-month (T-12) rent-growth surveys, Yardi Matrix divides the renter base into two classes: “Lifestyle” renters “have wealth sufficient to own but have chosen to rent,” according to the report, whereas “renters by necessity” encompass students, low-income families, military members, and other households for whom renting is the best or only option.

On a short-term, T-3 basis, multifamily rents rose by 0.5%, down 10 bps from July. Renter-by-necessity assets matched this 0.5% rise, while lifestyle assets grew by only 0.4%. Sacramento saw the greatest gains over the period, with 1.4% rent growth on a T-3 basis. Sun Belt areas such as Atlanta and Orlando and Tampa, Fla., have also seen strong recent growth, at above or near 1%.

On a long-term, T-12 basis, rents have grown by 6%, down by 10 bps points from July. Portland, Ore., saw the greatest gains in this period, at 12.5%, closely followed by Sacramento (11.2%) and Seattle (10.8%). Yardi notes that Portland's and Seattle’s increases are showing signs of moderating, however.

Renter-by-necessity (RBN) rents grew by 6.3% on a T-12 basis—70 bps higher than at lifestyle properties, whose rents grew by 5.6%. Denver sports the widest difference between RBN and lifestyle growth rates, at 9.9% and 4.9%, respectively.

Multifamily occupancy rates stood unchanged in July, at 95.8%. RBN and lifestyle property occupancy rates were also unchanged, at 96% and 95.5%, respectively. Both classes were near historical highs, though RBN has outdone lifestyle since September 2015, due to the latter category's greater supply.

Into the Future

The deceleration in rent-growth rates is “in line with expectations,” according to the report, and, in fact, the year-to-date growth rate for 2016 thus far exceeds Yardi’s initial prediction of 4.6%. “The slowdown is less cause for concern than the natural by-product of limits when income growth is between 2% and 3%,” the report says. “In that environment, rent growth can only return to more moderate levels.”

Yardi notes that in much of the country rent growth is strong. The report predicts that the 5% to 8% gains in rent growth in the Sun Belt, Southwest, and Southern California will lead to continued growth. The East and Midwest markets are also noted, for their 3% to 5% growth, which Yardi terms “reasonably strong by historical standards.”

Houston, San Francisco, Austin, and Denver are experiencing high rates of slowdown as they work to absorb an increased supply of apartment stock while their explosive job growth is slowing. Yardi predicts these markets' rent-growth figures won't pick up again until their market situations stabilize.