Tapering Continues in Multifamily Rent Growth

SANTA BARBARA, CA—For the third month in a row, average US monthly apartment rents fell slightly in November, according to Yardi Matrix's latest monthly survey, released Thursday. The survey cites the $2 decline, for an average of $1,214 per month across 123 metro areas, to factors including seasonality and the ongoing supply-demand imbalance in the luxury sector of many markets.

In particular, the Yardi Matrix report notes that growth in the high-end Lifestyle segment of apartments dropped by 0.2% over the trailing three-month period. At the same time, the increasing supply of Lifestyle units is putting downward pressure on performance in the segment. As a case in point of the moderating trend, Sacramento—while still the nation's rent growth leader—has eased from double-digit annual growth earlier this year to 9.0% in November.

“Despite the moderation, we once again stress that the multifamily market will be in good shape going forward,” the report states. “Rent growth remains 200 basis points above the long-term average and fundamentals are strong.” Meanwhile, in spite of the delivery of 300,000 new units year to date, occupancy rates have moved only slightly.

January 2017 will see a new president sworn in, and with that a change in policies, including some that relate to commercial real estate. Will the apartment sector see a major impact as a result? “Probably not—at least in the short term,” according to the Yardi Matrix report, which notes that “the basic strength of the multifamily market is likely baked in by demographics and social trends.” Moreover, “any major policy changes, if there are any, will take time to implement and go into effect.”

The report cites long-term demographic developments that include the growth of the prime-renter-age Millennial generation and the increasing number of retirees among the large Baby Boomer cohort. Additionally, “social trends—such as preference to live in urban areas without cars, later marriages, fewer children and inability to raise down payments for mortgages—are likely to continue.”

SANTA BARBARA, CA—For the third month in a row, average US monthly apartment rents fell slightly in November, according to Yardi Matrix's latest monthly survey, released Thursday. The survey cites the $2 decline, for an average of $1,214 per month across 123 metro areas, to factors including seasonality and the ongoing supply-demand imbalance in the luxury sector of many markets.

In particular, the Yardi Matrix report notes that growth in the high-end Lifestyle segment of apartments dropped by 0.2% over the trailing three-month period. At the same time, the increasing supply of Lifestyle units is putting downward pressure on performance in the segment. As a case in point of the moderating trend, Sacramento—while still the nation's rent growth leader—has eased from double-digit annual growth earlier this year to 9.0% in November.

“Despite the moderation, we once again stress that the multifamily market will be in good shape going forward,” the report states. “Rent growth remains 200 basis points above the long-term average and fundamentals are strong.” Meanwhile, in spite of the delivery of 300,000 new units year to date, occupancy rates have moved only slightly.

January 2017 will see a new president sworn in, and with that a change in policies, including some that relate to commercial real estate. Will the apartment sector see a major impact as a result? “Probably not—at least in the short term,” according to the Yardi Matrix report, which notes that “the basic strength of the multifamily market is likely baked in by demographics and social trends.” Moreover, “any major policy changes, if there are any, will take time to implement and go into effect.”

The report cites long-term demographic developments that include the growth of the prime-renter-age Millennial generation and the increasing number of retirees among the large Baby Boomer cohort. Additionally, “social trends—such as preference to live in urban areas without cars, later marriages, fewer children and inability to raise down payments for mortgages—are likely to continue.”