Moderation seems to be the magic word when discussing multifamily lately. As of November, average U.S. monthly rents decreased by $2 to $1,214, according to Yardi Matrix’s monthly survey of 123 markets. The most recent survey revealed that rents dropped $5 from the peak achieved in August. Year-over-year, however, rents increased 4.3 percent in November, resulting in a 10-basis-point decline from October’s figure and a 240-basis-point decrease from the October 2015’s recent spike of 6.7 percent.
According to the report, “Reasons for the decline include seasonality and the ongoing supply-demand imbalance in the luxury sector of many markets.” The latter part of the year typically sees slowing rent growth as fewer renters move during the holiday season. The report cites the continuing drop in growth within in the luxury lifestyle segment as another source of decline, as rents fell by 0.2 percent in the segment in the trailing three-month period.
Despite the moderation, the report states, “we once again stress that the multifamily market will be in good shape going forward.” Citing rent growth remaining at 200 basis points greater than the long-term average and strong fundamentals, Yardi Matrix reported that the occupancy rate of 95.8 percent for stabilized properties moved slightly even with the addition of 300,000 new units in 2016. These fundamentals suggest that robust absorption will continue in most metros. On the subject of moving parts in the U.S. government, the report states that while the results of the recent election “will bring major change in policies, producing both opportunities and challenges for commercial real estate, the basic strength of the multifamily market is likely baked in by demographics and social trends.”