Multifamily rents rose robustly in the second quarter, and the market’s consistent growth once again shows no signs of waning, according to the June report from Yardi Matrix.
“After a $12 jump in June, average rents increased by 2.0% in the second quarter of 2019, and they are up 2.6% so far this year. Those are not the biggest percentage increases achieved in recent years, but both come close to the best performance,” the Yardi Matrix report says.
Highlights of first half of the year ending with a flourish for multifamily
- A year of moderate rent growth turned serious in June, as the average U.S. multifamily rent increased by $12 to $1,465. Year-over-year growth increased to 3.3%, up by 40 basis points from May.
- Average U.S. rents grew by 2.6% in the first half of 2019, and 2.0% in the second quarter. Although growth tends to slow down in the second half of most years, the multifamily market’s extended run of strong performance does not appear to be winding down soon.
- Las Vegas (8.4% year-over-year growth) and Phoenix (8.1%) remain blazing hot, but the strong gains are not limited to any particular region. Rents in every metro on our Top 30 list increased by at least 1.3% on a trailing 12-month basis in the second quarter.
Solid fundamentals continue to be favorable
“As has been the case for years, favorable fundamentals are behind the shift. The economy has added 172,000 jobs per month this year, a slowdown from the 200,000-per-month average since the recovery began in 2010, but solid growth considering the below-4.0% unemployment rate and the lateness of the economic cycle,” the report says.
“Absent an unforeseen exogenous event, demand for multifamily shows no signs of abating.
“That doesn’t address whether rent growth can remain elevated, but rents have stayed at above-trend levels during several years of robust supply increases and ongoing issues with affordability, so it seems foolish to discount the market’s potential to maintain its performance over the near term,” the report says.
Lifestyle rents rose faster than renter-by-necessity rents for first time in recent years
Lifestyle rents outpaced renter-by-necessity (RBN) rents in 17 of the top 30 markets, indicating healthy demand for the new luxury product being delivered in many cities, the report says.
Housing affordability has recently come into the spotlight, not just for the real estate industry but for the 2020 presidential candidates, as well. Rent-control legislation has passed in New York and Oregon, with a number of other states also introducing bills.
Many of these bills focus on rent control for older stock, most of it RBN. As rent control expands, the ability to raise rents may put a ceiling on RBN rent growth and continue to narrow the gap between Lifestyle and RBN rent growth.