Easing Rent Growth? Not Yet

SANTA BARBARA, CA—The moderation in apartment rent growth that some industry observers are expecting for this year hasn’t happened so far in 2016, says Yardi Matrix. April rents nationally rose $13, or 1.1% month over month, to $1,194, the fourth consecutive all-time high, according to the firm’s Matrix Monthly report based on a survey of 115 markets.

Yardi Matrix’s report, issued Friday, says the survey reverses the declining trend in year-over-year growth, which had fallen to 5.7% in March after peaking at 6.7% in October. It bounced back up to 6.3% in April. “The strong performance comes as something of a surprise, since rent growth is expected to moderate this year after two years of above-trend increases,” the report states.

The report offers insights into why that moderation still hasn’t taken place, four months into the current year. “The growing amount of supply —more than 300,000 units will come online in 2016—will increase vacancies in some submarkets, but by and large most metros have not been overbuilt,” according to the report. “That’s because demand remains bullish in most metros due to demographic factors that include the growing number of Millennials and the propensity of older Americans to rent.”

Underpinning all else is the employment market, which has seen 200,000-plus jobs created per month for nearly six years. “Not only is the job market strong in the popular Western and Lifestyle markets but the metros in the Northeast and Mid-Atlantic are showing signs of strength,” according to Yardi Matrix.
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Leading the way in April rent growth was Sacramento, up 1.9% from the previous month. Other cities in the top five included Seattle; Portland, OR; Las Vegas and Boston. On a nationwide basis, the report says rents increased a “phenomenal” 0.8% per month on a trailing three-month basis, up 50 basis points from the previous month and 70 bps from February.