'Seasonality' in the Multifamily Market

Michael Tucker mtucker@mba.org

December 07, 2018


Apartment rents increased 0.1 percent between October and November, the second straight monthly increase after a slight dip in September, reported Apartment List, San Francisco.

"The recent increase, although modest, is somewhat surprising, given that rents normally experience a slight decrease in the fall and winter months due to seasonality," said Apartment List Housing Economist Chris Salviati. He noted the firm's national index fell 0.2 percent between September and November 2017 compared to a 0.2 percent increase over that period this year. "That said, rent growth has been sluggish for much of this year, so despite bucking the normal seasonal trend recently, year-over-year growth is still lagging the pace from the previous two years."

Salviati noted rents increased month-over-month in 58 of the nation's 100 largest cities. "Rents are up year-over-year in an even greater share of the nation's largest markets--83 of the 100 largest cities have seen rents increase over the past twelve months," he said.

Yardi Matrix, Santa Barbara, Calif., also cited apartment market seasonality as the reason for "flattening" year-over-year rent growth. Year-over-year multifamily rent growth fell by 10 basis points to 3.1 percent. "The small decline can be chalked up to normal seasonal fluctuation," the firm's Multifamily Monthly Report said, noting apartment demand has remained strong--exemplified by a stable occupancy rate for the last six months despite supply growth in many metros.

"2018 is shaping up to be another solid year for the multifamily market," Yardi Matrix said.

Marcus & Millichap, Calabasas, Calif., said the gap between the cost of homeownership and renting is widening, pushing many would-be homeowners to opt for apartment living instead of buying a home. "Class B and C properties are facing exceptionally tight dynamics as new apartment development is focused on high-rent, Class A units," the firm's Multifamily Research Market Report said.

Apartment rent growth is currently well behind the overall inflation rate, Salviati said. The economy's overall inflation rate currently stands at 2.5 percent. Apartment rent growth similarly lags average hourly earnings growth, which have increased by 3.1 percent over the past twelve months. "This year's moderation in rent growth is a welcome bit of relief as millions of our nation's renters continue to struggle with housing affordability," Salviati said.

But limited housing stock for families seeking less expensive rental housing will likely remain an issue going forward, Marcus & Millichap predicted.

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