Matrix Monthly: Rents Jump $5 in January
- Feb 08, 2017
The end of 2016 marked a seasonal leveling out of average rent growth, but the start of 2017 is starting out strong, according to Yardi Matrix’s monthly survey of 124 metros. U.S. monthly rents increased by $5 in January to an average of $1,315, the report revealed. On a year-over-year basis, rents increased to 4.6 percent, which is a 30-basis-point jump from December’s average, but 240 basis points less than January of 2016.
“With a handful of exceptions,” Yardi Matrix’s analysts write, “rent gains continue to be led by the high-population growth centers in the West and South.” In the Matrix Monthly survey of the country’s top 30 markets, 15 metros surpassed the national average and 14 of those are considered to be among the high-population growth centers. At 10.5 percent rent growth, Sacramento topped the list, followed by Seattle at 8.4 percent, proving the metro’s resiliency despite its influx of new supply. The Inland Empire region of Southern California, at 7.6 percent, is similar to Sacramento with its high barriers to entry and lack of new supply.
The report notes that some of the worst-performing metros neighbor their high-performing counterparts in the West and South. Houston experienced the least amount of growth at 0.7 percent, followed by San Jose at 0.9 percent and San Antonio and San Francisco, both at an average of 2.8 percent. Houston and San Jose were the only surveyed metros that fell below the long-term average of 2.7 percent.
“The surprisingly robust start to the year demonstrates the industry’s ongoing positive fundamental drivers, which aren’t expected to change significantly in 2017, even if rents are likely to decelerate slightly due to the growth in supply in many metros,” the report stated. Baby Boomers and Millennials are expected to continue their run as the top demand drivers for multifamily as employment and household formation improves alongside the economy. While many have concerns of oversupply, Yardi Matrix asserts that these positive factors are poised to continue.
Nationally, Yardi Matrix predicts the delivery of 320,000 new units in 2017, which marks a peak in the current cycle. Absorption and occupancy remain strong, but the sheer number of new units emerging is predicted to spur a deceleration in rent growth in many metros. The following metros are reported to contribute significantly to total stock include: Nashville (5.7 percent growth), Seattle and Miami (5.5 percent), Denver (4.9 percent), Boston (4.3 percent), San Antonio and Dallas (3.7 percent), Austin (3.3 percent), Raleigh-Durham (3.1 percent), and Portland (3 percent). Overall, the researchers at Yardi Matrix remain optimistic about this year’s prospects. “We remain optimistic about the country’s growth prospects under a less-regulated economy, but the emphasis on tariffs and limiting immigration in the administration’s early days bears watching,” the report concluded.
The report also included a note regarding its methodology change, which began with this month’s survey. Matrix Monthly surveys will now take recent-vintage properties into account, which is expected to result in more accurate averages.
To read the full report, visit the Yardi Matrix website.