Multifamily rents rose in August, keeping alive a long streak of 3-percent-plus year-over-year growth, according to the latest report from Yardi Matrix.
Another month, another good performance by the multifamily market in August, as the average U.S. rent increased by $2 to $1,472.
- The multifamily market’s healthy growth was displayed in August, when the average U.S. multifamily rent increased by $2 to $1,472. Although year-over-year growth fell 10 basis points from July to 3.3 percent, rent growth has remained exceptionally consistent, and has been at least 2.7 percent since the beginning of 2018.
- Rent growth is healthy to above-trend in virtually every major market. Las Vegas (7.6 percent), Phoenix (7.0 percent) and Sacramento (5.0 percent) have been among the top metros for rent growth for some time, while other markets have been taking turns at the next level.
- Consistency extends in a number of directions. For example, the growth for the luxury Lifestyle segment has increased to roughly the same level as that of the Renter-by-Necessity segment.
The market’s accomplishments are not a mystery; the combination of strong demographic trends, social changes that create demand for apartments, demand for new housing and the country’s long period of economic growth, have propelled the segment, according to the report.
One potential question: The economy
With the exception of the economy’s performance, most of the above trends are long term in nature.
- Market volatility and the inversion of the yield curve are producing concerns about the stability of the economic cycle, despite fairly healthy fundamental factors, such as employment numbers.
- Much of the concern is generated by issues that could be characterized as political risk, such as the trade war with China and global growth in Europe and Asia.
- The multifamily market also is seeing an increase in potential moves toward rent control. All of these need to be monitored.
The U.S. commercial real estate market has its own political risks, including new rent-control laws in place in New York and Oregon with California coming soon, and the growing chorus to enact rent control in other parts of the country.
New York’s rent control has had an immediate negative impact on property values and will likely lead to less supply and deterioration of existing rent-stabilized stock.
Home rule in states such as California has allowed NIMBYism (not in my back yard) to stifle badly needed housing development, and attempts at more regional approaches are failing.
Given the underlying economic performance and favorable demographic trends, it will take more than some bad policy to disrupt the multifamily market, but it’s also prudent to be watchful of events and to plan accordingly, Yardi Matrix said in the report.