Multifamily Rents Growing--Slowly

Michael Tucker mtucker@mba.org

May 29, 2019


U.S. multifamily rents increased slightly in April as the occupancy rate continued to inch upward.

Yardi Matrix, Santa Barbara, Calif., said the average apartment rent increased $5 nationally in April to $1,436. "Market performance has been remarkably consistent over time and across geographic zones," the company's National Rent Report said. "Growth continues to be highest in lifestyle metros in the Southwest, Southeast and California, but other than Houston there are not many markets in which growth trails long-term averages by any significant degree."

Julia Bunch, Analyst with RealPage, Richardson, Texas, called April's apartment performance solid as the occupancy rate increased 10 basis points to a "healthy" 95.4 percent. "Apartment occupancy tends to soften in the colder months as renters typically avoid moving in winter," she said. "April's strengthening occupancy puts the rate on par with those seen in the fall and indicates the expected end of the slow leasing season."

Bunch said developers delivered nearly 285,000 new apartments across the U.S. in the 12 months that ended in April and reported another 420,000 units in the pipeline.

The Bureau of Labor Statistics reported the U.S. economy added more than 200,000 jobs in March. This strong job growth created a good environment for young workers to form households, Yardi Matrix said.

In addition, the recent trend toward increasing homeownership slipped in the first quarter as the homeownership rate dropped 60 basis points to 64.2 percent. "Some of that undoubtedly had to do with the fourth quarter increase in mortgage rates," the Yardi Matrix said. "Interest rates have dropped again over the last couple of months, which might boost prospects, but the sensitivity to rates illustrates the fragility of the financial wherewithal of potential buyers."

On the metro level, the Southwest is booming. Phoenix caught up to Las Vegas in April for the highest growth rate at 7.3 percent, Yardi Matrix said. In the Southeast, Atlanta (4.8 percent), Raleigh (3.7 percent), Tampa (3.6 percent) and Charlotte (3.4 percent) all posted strong rent growth.

Growth remains consistent across other regions. Mid-Atlantic metros, which have had weaker growth during this cycle due to tepid population gains and low affordability, are uniformly solid, Yardi Matrix said. Philadelphia apartment rents increased three percent year-over-year while Baltimore increased 2.4 percent and Washington, D.C. 2.3 percent. Houston ranked last among major metros with a 0.6 percent year-over-year gain.

"With the prime rent growth season just starting, it remains to be seen whether this year's gains will be stellar or merely average, but in any event there seems to be no reason to think the multifamily juggernaut is going to hit the pause button," the report said.

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