DALLAS—Effective rent growth in US multifamily year to date is the best since the nation’s economy began recovering from the Great Recession, locally based Axiometrics said Tuesday. Effective rent growth rose to 3.4% in April, up from 3.1% the previous month and 3.2% year over year. The research firm credited increased occupancy and burgeoning job growth with giving apartment landlords the impetus to raise rents.
Apartment occupancy increased last month to 94.8%, a 60-basis-point rise since 2014 began. At the same time, job growth was 1.6% in March, while the national unemployment rate dropped to 6.3% in April. Accordingly, more people sought housing in what is already a landlord’s market, Axiometrics says.
The firm’s KC Sanjay blogged on Tuesday that the strong showing was “a surprise to many analysts, including us at Axiometrics.” The general perception had been that rent growth and occupancy “would begin tailing off about now.”
Jay Denton, the firm’s VP of research, calls the April numbers “outstanding” and says they exceed expectations. “Whether performance continues to exceed expectations for the rest of the year will depend on numerous factors.”
Among these is increasingly supply, which will rise by a projected 200,000 units by year’s end. And the ease of obtaining a mortgage is another: as of early this month, many lenders had begun lowering credit-score requirements, giving more renters a shot at buying a home.
Still, the so-called millennial generation is predisposed toward renting. Axiometrics nonetheless projects that as supply begins to meet demand, occupancy will slow down and draw closer to the long-term average by year’s end.
Despite this, Sanjay blogged that although the rate of annualized effective rent growth will be impacted, “rents will still tilt upward in all but a few markets. Washington, DC is the only major market to see a decline in rents, with a rent growth rate of -0.5% and a revenue growth rate of -0.3%.” A smaller market, Baton Rouge, LA, saw effective rent growth of -3.43 in April, along with revenue growth of -4.6%.
Class B properties are leading the way with effective annual rent growth, increasing 3.6% year over year. However, class A assets shone on a month-to-month basis, with 3.5% growth in April compared to 2.6% in March.
Not surprisingly, the fastest-growing markets tend to be concentrated in California, Florida and Texas. Powered by the Eagle Ford Shale deposit, Odessa, TX led the way in April with annual effective rent growth of 11.6%, revenue growth of 11.1% and occupancy of 98%.
Nonetheless, Odessa’s rent growth was off from the April 2013 figure of 15%—in contrast to second-ranked Naples, FL, where April growth in both rent and revenue was up sharply Y-O-Y. Other markets with strong April numbers included the three major Bay Area markets: Oakland, San Jose and San Francisco, as well as Denver.