YARDI MATRIX MONTHLY
Rent Survey | December 2016
National averages include 119 markets tracked by Matrix, not just the 30 metros featured in the report. All data provided by YardiMatrix.
National Average Rents Average U.S. monthly rents dropped by $4 in December, as growth continues to cool. Rents fell to $1,210, according to Yardi Matrix’s monthly survey of 124 markets.
On a year-over-year basis, rents grew 4.0% nationwide in December, a 30-basis-point decline from November and a 270-basis-point drop from the recent high of 6.7% in October 2015. Rents have now dropped for four straight months, although the total decline is fairly minimal, only $10 total. Some of the drop can be attributed to normal seasonal factors, but it is clear that rents are in a period of deceleration after growing at high levels for the previous two years.
Growth in some metros has flattened considerably—examples include Houston (-0.5% year-over-year), San Francisco (0.4%), Boston (1.5%), Austin (2.8%) and Miami and Denver (3.3%)—while in other metros it remains robust but not at the frothy levels of a year ago. Examples of metros in which growth has cooled but remains healthy include Portland (6.2% year-over-year), Seattle (6.1%), Atlanta (5.6%) and Dallas (5.1%). As we have stressed in recent months, fundamentals remain sound and deceleration is not alarming, given that gains remain well above the long-term 2.3% average. The current level of growth is on par with our forecast for 3.9% increases in 2017. Clearly, this year remains difficult to predict, what with the prospect of major changes in taxes, tariffs, regulatory policy and foreign policy.
That said, with the economy creating jobs at a 2 million-per-year rate and GDP growth showing strength, we expect no let-up in apartment absorption. We do expect rent growth to continue moderating during the first half of the year, as a large amount of new supply comes online and apartment owners must compete to maintain high occupancy levels. Growth should get a boost in the second half ,as the impact of economic stimulus takes effect and the increase in new supply begins to slow
Trailing 3 Months: Seasonality Hits Short-Term Rent Growth Nationally, multifamily rents fell 0.3% on a trailing three-month (T-3) basis in December, marking a 10-basis-point decline from November.
The decline was concentrated in higher-end Lifestyle properties, where rents dropped 0.4%. Rents in the working-class Renter-by-Necessity (RBN) segment fell by 0.1%. The T-3 survey captures short term changes in rents that may or may not be indicative of future trends. Seasonality has been less of a factor in recent years due to the atypical strength of the multifamily industry, so the end-of-year deceleration in 2016 seems to indicate a more normal environment.
Leading T-3 markets were once again Sunbelt areas such as Phoenix (0.3%), San Antonio and Los Angeles (both 0.2%). The fastest-declining markets were Boston (-1.0%), Austin and Portland (both -0.8%), all markets that have had significant supply increases of late. Comparing Lifestyle to RBN, Denver sticks out as the fastest-growing Lifestyle market in the country on a T3 basis (0.3%), while also being the fastest-declining market for RBN (-0.8%). Over the past year, Denver has seen significant rent growth among RBN units while Lifestyle units have flattened, and the recent reversal in the T3 data may be signs of a reversion to the mean for the whole market.
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