Apartments See Strong First-Half Finish

Michael Tucker

July 16, 2019

The first half of 2019 ended "with a flourish" for multifamily real estate, said Yardi Matrix, Santa Barbara, Calif.

After a year of "moderate" rent growth, apartment market rents grew faster in June, the Yardi Matrix Multifamily National Report said.

Year-over-year rent growth increased 40 basis points from May to 3.3 percent as the average U.S. apartment rent reached $1,465. "Although [rent] growth tends to slow down in the second half of most years, the multifamily market's extended run of strong performance does not appear to be winding down soon," Yardi said.

Multifamily rents grew slowly in early 2019 compared to recent years, which led to speculation about a possible end to the long string of positive growth or even a slowdown. "However, rents rose robustly in the second quarter and the market's consistent growth once again shows no signs of waning," Yardi said.

Favorable sector fundamentals led to the shift, Yardi said. The economy has averaged 172,000 new jobs created per month this year, down from the 200,000-per-month average since 2010 but solid growth considering the below-four percent unemployment rate and the aging economic cycle.

In addition, the Census Bureau said the number of renter households climbed to a record high in the first quarter. 

In a separate report, Apartment List, San Francisco, said the apartment sector is "evolving" as many new demographics enter the market in record numbers. "The number of high-earners who rent instead of own is surging and seniors are increasingly more likely to rent their homes each year," the firm's Renter Stigma: Social and Economic Pressure in the Housing Market report said. "[Also,] single-family homes are increasingly occupied by renters, making it harder to tell renters and homeowners apart."

Short of an unforeseen event, multifamily demand shows no signs of abating, Yardi Matrix said. "That doesn't address whether rent growth can remain elevated, but rents have stayed at above-trend levels during several years of robust supply increases and ongoing issues with affordability, so it seems foolish to discount the market's potential to maintain its performance over the near term."

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