U.S. multifamily rents rose by $4 to $1,430 in March 2019, while year-over-year rent growth fell 20 basis points to 3.2%, according to Yardi Matrix’s latest Multifamily National Report.
On a quarterly basis, rent rose by 0.4% in the first quarter of the year, demonstrating consistent albeit slow growth. Rents grew by at least 0.8% in the first quarter of the year between 2014 and 2016, by comparison.
Despite this national slowdown, rent growth remains healthy in the top 30 markets, according to Yardi. Las Vegas and Phoenix hold a commanding lead with 7.5% and 7.2% growth YOY, respectively, followed by Atlanta and the Inland Empire, both at 4.8%. All of these markets have experienced above-trend job and population growth despite strong supply growth.
Out of the top 30 markets, 25 posted rent growth of 2.5% or greater in March, and none saw rents decline. San Francisco’s rents rose by 3.9% year-over-year, while Los Angeles’s rents rose 3.4% over the same period.
Rents rose by 0.1% in March on a trailing three-month (T-3) basis, which compares growth statistics from the last three months to the previous three months. Raleigh, N.C. led this short-term growth metric with 0.4% rent growth on a T-3 basis, followed by Phoenix, Minneapolis/St. Paul, Minn., Kansas City, Mo. and Las Vegas, all at 0.3%.
Yardi attributes strong growth in North Carolina’s major markets – including Charlotte at 0.2% – to its strong education, finance, and tech employment sectors, as well as a favorable cost of living. Overall, the nation’s rent increases are concentrated in secondary and tertiary markets where strong economic and population growth meet low costs of living.
On the opposite end, Portland has experienced negative rent growth on a T-3 basis at nearly -0.1%. Yardi notes that the state of Oregon recently passed rent control, and while the initial provisions allow for growth above the national average, some in the industry fear regulation may tighten over time.
A number of negative economic trends have raised concerns about the economy’s health, according to Yardi. The consensus GDP forecast has fallen to 2.4% for 2019 from 2.9% in 2018, and is expected to fall to 2.0% in 2020. Only 20,000 jobs were added in February, marking the slowest job growth since September 2017. And the Federal Reserve has decided to make only one rate increase over the next two years, causing 10-year Treasury yields to drop to 2.4% as of late March.
However, demographic trends are expected to remain a positive driver for the apartment market, and stable interest rates are expected to be a positive for the cost of commercial real estate capital. Growth is likely to slow, Yardi says, but multifamily demand among investors and potential tenants should remain strong.