SANTA BARBARA, CA—Multifamily rents reached a new record high of $1,167 in September, while also reaching the highest year-over-year growth of the post-recession cycle, Yardi said Wednesday. The month’s Y-O-Y increase of 6.8% was 30 basis points higher than the annual growth for July and August, according to the latest edition of Matrix Monthly, a survey of the 108 markets covered by Yardi Matrix. The average growth rate over the past eight years was 2.8%.
“Buoyant multifamily rent growth is hardly a surprise, but what is improbable about this year is the consistency of the increases,” according to Yardi’s report. “Rents have risen every month in 2015.”
In general, growth tends to be at its highest during the summer months, leveling off in the fall and winter, when fewer people move. Since this past June, according to Yardi, rents have increased by $17, or 1.4%. In contrast to this summer, rents grew 0.9% during the same period in 2014 and 0.5% in 2013. “The mid-summer correction in stock prices seemingly had no effect on the upward march of rents, but the impact, if any, is likely to be felt in coming quarters, if economic growth begins to wane,” according to the Yardi report.
There was a divergence in rent growth among properties by quality during the quarter, as working-class “rent by necessity” assets saw a 0.6% increase, compared to 0.3% for higher-end lifestyle properties. “Clearly, there is more room for pricing growth at the lower end of the quality spectrum,” Yardi says.
Nationally, rents grew by 5.6% on a trailing 12-month basis, which averages the past 12 months compared to the prior-year period. That represented a 30-basis-point increase over August. Upscale lifestyle properties rose 5.8%, outperforming the working-class rent by necessity segment, which rose by 5.5%.
Growth continues to be dominated by metro areas in the Pacific Northwest and the Western lifestyle markets. Portland (12.0%), Denver (11.8%) and San Francisco (11.7%) all saw double-digit growth in the trailing 12 months, while Sacramento (9.7%) comes close to that level. At the other end of the spectrum, Mid-Atlantic metros Richmond (1.3%), Washington, DC (1.5%) and Baltimore (2.2%) continue to comprise the bottom of the ranking.
“Strong growth in employment and in-migration in most top markets continues to drive the rent engine,” according to Yardi. “Some 60% of Yardi’s Top 30 metros have added 3% or more to their employment base in the 12 months ending in July, according to the Bureau of Labor Statistics.”
One of the country’s best-performing regions has been the Southeast, led by Atlanta, Orlando, Miami and Tampa. Y-O-Y rent growth has been above the 6.8% national average in each of those metros. Furthermore, increases on the basis of Yardi’s T-3 indices—trailing 12 months overall, trailing 12 months lifestyle and trailing 12 months necessity– are all above-trend as well, which indicates “little or no reduction in momentum” for those cities.
Rents in Atlanta, Orlando and Miami all grew by 0.7% on a T-3 basis, while Tampa rose 0.6%. “Southeast metros continue to see above-trend employment growth, led by corporate relocations, increasing back-office staff and robust tourism, with growing populations drawn by the availability of jobs and inexpensive housing,” according to Yardi.
Conversely, Houston is evincing cracks from the drop in energy prices. Rent growth in the nation’s leading energy market has fallen to a “relatively mediocre” 4.9%, Yardi says, while T-3 growth over the past three months has been almost flat, at 0.1%.