What October’s Cooling Rents Mean for Multifamily

Yardi Matrix editorial director Paul Fiorilla weighs in on the October Matrix Monthly report findings.

For the first time this year, there has been no rise in rents month-over-month, ending the recent rent growth streak. According to the Matrix Monthly report released by Yardi® Matrix, October rents were $1,166, differing little from the September figure.

“That’s not surprising, because rent growth is seasonal and usually rent growth is highest in the spring, and fewer people move in the fall. So it’s not unusual that rents didn’t go up this month,” commented Paul Fiorilla, editorial director at Yardi Matrix.

There was still an increase in the year-over-year October figure of 6.7 percent, which is 10 basis points higher than September’s post-recession high-water level. Rental rates are showing signs of slowing in the rapidly growing markets of Portland, Ore., San Francisco, Seattle and Denver.

“Rent growth, nationally, is still very strong. It’s 6.7 percent compared to the historical average of 2.8 percent. We’re starting to see signs that there’s a rotation of the rent growth, that some of the hot cities and hot markets are cooling down to more sustainable levels,” said Fiorilla.

However, markets like Atlanta, Orlando, Fla., Phoenix, Dallas and Tampa, Fla., are heating up and displaying late-stage growth. “These are markets where the economy is very strong, and there’s a lot of job growth. There is a sign that some of the hotter markets that have been really hot may be cooling down, but 12-15 percent rent growth is not sustainable. If they cool down, that’s not a surprise,” said Fiorilla regarding these up-and-coming markets.

Fiorilla also pointed out that in the three-month figure, there is a large gap between rental growth of lifestyle units and rent-by-necessity units, citing that 16 out of 30 metros experienced negative growth for lifestyle units. “That’s a sign that possibly the increased supply in a lot of markets on the high end are starting to hit the limits on rent growth among the more expensive higher-end properties where the demand is still pretty strong for more affordable properties,” he explained.

Download the full October report on the Yardi Matrix website.