Apartment Rent Gains Heat Up With Weather

Michael Tucker mtucker@mba.org

May 11, 2018

Multifamily rents continued their strong seasonal gains in April, rising $4--the highest figure since last spring--to a $1,377 national average, reported YardiMatrix, Santa Barbara, Calif.

On a year-over-year basis, rents are up 2.4 percent through April, approaching the 2.5 percent growth range the market has averaged since early 2017, the YardiMatrix Rent Survey said.

"The healthy seasonal gains are a good sign that rent growth will remain resilient despite the headwinds faced by the market, particularly the peaking supply pipeline that has produced deceleration in some metros," YardiMatrix said.

After two years of slowing rent growth, the multifamily market faced a test in April, the report said. Rent growth tends to be highest in the Spring, but would that hold true this year or would rents stay flat as they had from summer 2017 through February due to "surging" deliveries that caused occupancy rates to drop in almost every metro? The report called April's performance "a relief to worriers," saying U.S. rents are up $10 over the past two months.

"The big picture is that even though the occupancy rate is dropping slowly closer to the historical average, the market is in a healthy position for the long term," YardiMatrix said. The Census Bureau reported the national apartment vacancy rate fell 10 basis points in the first quarter to 8.2 percent. "Demand is expected to remain high, while overall housing stock is growing at roughly the same number as new households."

Multifamily supply is unbalanced in some metros and submarkets, either because the total number of units is too great or the type of supply is not balanced with the demand for units affordable to working families, YardiMatrix noted. "In those areas, rents will flatten or even drop slightly. By and large, however, signs suggest rents will keep growing moderately or better."

YardiMatrix said spring is generally the busiest time for apartment rentals "and historically has seen the most rent growth. This year appears to be no different, indicating that rents will continue to grow as healthy demand helps to mitigate the effects of the delivery pipeline, which is expected to bring 360,000 units into the market in 2018."

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