SANTA BARBARA, CA—It appears to be a seasonal occurrence. Along with Halloween and the end of Daylight Saving Time, this time of year brings a flattening of apartment rent growth. Yardi’s latest Matrix Monthly report shows that US multifamily rents held at an average $1,166 for October, unchanged from the month before.
October’s rent performance in this regard followed a pattern seen in the past two years, according to Yardi. Along with October representing the first month this year in which rents did not rise month over month, it also represented a slightly lower rate of year-over-year growth at 6.7%, 10 basis points shy of September’s rate, which marked a post-recession high watermark.
That being the case, even October’s slightly slower pace of Y-O-Y growth was way ahead of the 2.8% average of the past eight years. And while Yardi isn’t calling a substantial slowing in rent growth ahead, the firm does say that we’re starting to see “a rotation among markets.”
While it’s too early to declare a definitive trend, Yardi is seeing signs that “ rent growth is beginning to rotate from ?the western tech axis to markets with late-stage growth.” Portland, OR remains the fastest-growing market for multifamily rents on a Y-O-Y basis, but on a trailing three-month basis it has slipped closer to the middle of the pack. San Francisco and Seattle, ranked in second and third places for Y-O-Y rent growth, are even farther down the ladder for the trailing three months.
Meanwhile, Yardi says rents are strong in markets such as Atlanta, Orlando, Miami, Phoenix, Dallas, Jacksonville and Tampa, “driven by robust job markets that are drawing growth in population and demand for housing. Those metros have averaged year-over-year job growth of between 2.8% (Phoenix and Jacksonville) and 3.9% (Orlando), according to the Bureau of Labor Statistics.”
Texas’ top two multifamily markets represents, one might say, a tale of two cities. “Dallas, demonstrating its diverse economic base, has not been affected by the drop in energy prices,” according to the Matrix Monthly report. With jobs being added at 3.6% Y-O-Y rate, Dallas has remained in the top 10 in both the three-month and 12-month rankings. Conversely, “Houston has seen rent growth decelerate, particularly in the lifestyle segment, as the job engine has stalled in recent months.”
Another trend to watch, Yardi says, is “the short-term bifurcation in which growth in higher-end Lifestyle properties has cooled relative to working-class Rent By Necessity properties.” The fact that Lifestyle growth has cooled while RBN outperforms is not surprising, Yardi says. “Supply of high-end properties is rising rapidly in many markets, while affordability issues produce more demand on the lower end of the quality spectrum.”
The recent cooling off in the Lifestyle segment has spread to ostensibly hot markets such as San Francisco, San Diego, Portland and Denver, Yardi says, all of which have seen negative growth over the past three months. Boston is the only metro in the Matrix survey that has shown negative growth on a T-3 basis in both the Lifestyle and RBN segments. Conversely, Atlanta leads in both the T-3 rankings overall and in the Lifestyle segment; in RBN properties the top growth market for the trailing three months was Jacksonville.