After a winter of expected deceleration in the multifamily market, March 2017 marked the first monthly increase in five months, making it the most significant jump since June of 2016. According to Yardi Matrix’s monthly survey of 121 markets, average U.S. monthly rates increased $6 to $1,312. On a year-over-year basis, the report reveals rents increased 2.7 percent, which is 10 basis points less than February and half the 5.4 percent growth seen a year ago.
Overall, between July and February, rents appeared to stay stagnant, though the report accounts for seasonal trends when factoring in the past seven months’ figures. “The spring typically ushers in higher rents because tenants tend to move more as the weather improves, but the slowdown also reflected the effect in some markets of the growing supply pipeline and issues of affordability,” Yardi Matrix’s analysts posit in the report. The Matrix monthly reports have continually forecasted a moderation in the unsustainable growth seen last year, and even though rents increased in March, the March report maintains that rents should moderate at a reasonable 3 percent growth rate for the year.
March marked the Federal Reserve’s increase in short-term interest rates as the economy is producing an average of 200,000 jobs monthly, and the Consumer Price Index is experiencing a 2 percent target rate after a dearth of significant growth. The health of the current economy will definitely affect multifamily demand, and possibly result in more rate increases, which the report states would “raise borrowing rates and put pressure on historically low property yields.” The analysts also mention disparity between parties in D.C. as a possible game-changer, as the expected changes in tax and regulatory policy may be diluted or stalled completely, as evidenced by the failure to repeal the Affordable Care Act.
All in all, multifamily fundamentals remain strong, with new supply being absorbed and rent growth close to reaching its long-term average. Though Yardi Matrix continues to observe and forecast deceleration, the report assures that the healthy fundamentals experienced in the current cycle are expected to continue.
To read the full report, visit the Yardi Matrix website.