Yardi Matrix Winter Outlook: Moderation on the Horizon?

Yardi Matrix forecasts favorable fundamentals and strong investment despite a slight decrease in rent growth and uncertainty in the capital markets.

Experts have been maintaining an “all good things come to an end” mentality when it comes to the extraordinary growth experienced by the real estate industry in the past several years. While it’s clear that rent growth is due for a slowdown, the analysts at Yardi Matrix predict that the “good times” the industry has been experiencing aren’t due to end just yet. In its Winter 2017 Market Analysis, Yardi Matrix reports that while transaction yields have bottomed and oversupply is a genuine concern for many metros, fundamentals are expected to continue to be positive. “Demand for units will remain strong,” the report states, “even if the growing amount of supply pushes occupancy rates down slightly.”

While the new administration brings uncertainty, the expected tax cuts, infrastructure investment and loosening of business regulations are poised to stimulate the economy. The report predicts that these new policies may improve upon the conservative growth that the U.S. economy has been experiencing. However, Matrix purports, “potential headwinds include the possibility of tariffs or focus on unproductive policies such as deportation.”

National rent increases are predicted to be slightly less than 4 percent, which is still more than the historical trend of 2.3 percent, a sign of a generally healthy market. In metros that had unstainable growth or issues with supply, affordability or employment, deceleration is expected. Nationally, however, supply is expected to be strong, with an estimated 320,000 units scheduled to come online. As construction financing becomes harder to obtain, the pipeline may begin to diminish.

Overall, Matrix expects the capital markets to continue to support growth in multifamily, even if complications arise. “Multifamily is still generally viewed as a safe investment with good prospects, but some investors are beginning to hold back due to concerns about interest rate increases when acquisition yields are at historical lows,” the report states. “The debt markets remain stable, although GSE reform is looming in the background.”

To read the full report, visit the Yardi Matrix website.