Rents Remain Stable Despite Seasonal Slowdown
- Dec 07, 2015
By Mallory Bulman, Associate Editor
The Labor Department released its findings that job growth is on the rise, which leads many to expect an interest rate hike from the Federal Reserve this month. While there are quite a few economic factors that impact the current health of the market, this most recent data bodes well for the real estate industry, with big gains in job growth for the construction and retail sectors. However, in order to get a true sense of the status of the multifamily market, one must look at the average rent data, which was released Friday in a report from Yardi Matrix.
The Matrix Monthly report for November shows a negligible drop by $1 to an average of $1,165, which is typical for the season. “Rents being stable in a time of normal seasonal slowdown is a sign of strength,” noted Paul Fiorilla, editorial director of Yardi Matrix. He also pointed out that numbers could possibly be affected by snowbirds seeking warmer climates for the winter, or by those who work in construction, who may find more work opportunities down south during this time of year.
Year-over-year, rents still increased by 6.4%, a 190-basis-point jump from 2014. “The month-over-month is kind of volatile, so I think the year-over-year is a stronger indicator of what’s going on,” said Fiorilla. “All signs point to rent growth remaining strong. It’s going to level off a little bit, but it’s still going to be above historical averages for another year at least.”
Portland and Seattle continue to lead the year-over-year figure, with runners up Sacramento, Seattle, Atlanta and Denver showing ongoing strong growth. The trailing three-month figure shows a national rent increase by an average of 0.1 percent, which is a 20-basis-point decrease from last month. According to the report, the drop in growth may be caused in part by the decline in growth for lifestyle asset class rents. “Without trying to read too much into short term numbers, that looks to be a sign that there is some resistance to rent increases at the high end of the scale in some of those hot, trendy markets,” Fiorilla surmised.
While these findings may indicate waning gains for lifestyle or luxury apartments, Fiorilla said these numbers don’t mean much for the overwhelming supply of and demand for new units. “There are very few markets in the U.S. where oversupply is a problem at the moment. The long-term demographic trends and the short-term economic trends all point to continued strong demand for apartments, and the amount that’s being built in the vast majority of markets isn’t enough to keep up with the current level of demand,” he concluded.