Market Remains Healthy Despite Slight Dip in Rents

July posted a 2.6 percent year-over-year increase, even after a slight decline from June, according to Yardi Matrix. So far this year, rents are up 2.7 percent compared to 2016.

MatrixMonthly_0717_YOYThe U.S. multifamily market is still in a healthy place, Yardi Matrix reported in its monthly survey of 121 markets. Sequential rent growth remained practically flat in July, as average U.S. rents increased by $1 to $1,350. On a year-over-year basis, rents increased 2.6 percent in July nationwide, which represents a 10-basis-point downturn from June’s figures. According to the Yardi Matrix report, “Actual rents have increased every month this year, and are up 2.7 percent year-to-date.”

Although Yardi Matrix’s analysts report that they “expect the rent gains to slow down in the second half (of the year),” the survey results bode well for the multifamily market. As rent growth usually slackens in the second half of the year and the rent increases in 2017 so far have already placed this year above average, the slight month-to-month decreases won’t have much of an impact on the market overall. 

Generally, this year has seen a stretch of rate-growth deceleration after a period of unsustainable growth reaching as high as 5.7 percent in early 2016. The report points to the general stability across different metros as a sign of strength for the market as a whole. “Of the top 30 metros in the Matrix Monthly survey, only one (Houston) has negative results year- over-year,” the report states, “and 19 have increases of 2 percent or more.” Furthermore, the markets that are in the 2 percent or less category (Portland, San Francisco and San Jose) are cooling off after spans of oversized gains and are now showing signs of looking up once again. As the trailing three-month figures show that no markets had negative numbers and 25 of the top 30 metros showed increased of 0.4 percent of more, market players should be encouraged. 

Absorption continues to drive fundamentals. Job growth remains steady despite indecision from Congress, and new jobs are driving household formation, which prompts demand for apartments. Occupancies remain at near historically high levels despite the fact that new supply is expected to reach a cycle high of 360,000 in 2017. The downside of new completions, according to the report, is “increased concessions for high-end units and growing vacancies in some submarkets.

Read the full report through Yardi Matrix.