The U.S. multifamily market was consistently strong in the first half of 2018, according to the June 2018 Yardi Matrix Multifamily National Report.
Rents continued to grow:
• Up $12 in June to an all-time high of $1,405
• Up 2.1% in the second quarter, the highest since rents grew by 2.3% in Q2 2015
• Up 2.6% in the first half, topped only by a 2.9% growth rate in the first half of 2016
• Year-over-year, rents are up 2.9% as of June 2018
According to the report:
Strong apartment rent growth in the spring is normal and isn’t indicative of the future. But the picture that emerges from the first-half numbers is reassuring. Late-stage metros boosted by a wave of population growth, low housing costs and healthy employment gains continue to see outsize rent gains. Meanwhile, technology-led metros such as San Jose, San Francisco and Seattle— where rents have decelerated sharply—rebounded with robust second-quarter gains.
The multifamily market’s performance in June is a sign of the sector’s strength and consistency in 2018, the report says, despite some concerns within the industry.
Here are some other of the report’s findings:
• Orlando continues to lead the nation (7.4%), as rent growth in central Florida has accelerated over the past 12 months. Secondary markets in the Southwest also had strong growth, as Las Vegas (6.5%), the Inland Empire (5.6%) and Phoenix (5.0%) are attractive relocation markets for southern and coastal Californians looking for a more affordable cost of living.
• Renter-by-Necessity (3.4%) assets continue to outperform Lifestyle (2.4%), as demand for lower-cost housing remains high.
• The top 30 metros were all positive, although Houston slowed after strong growth in the past nine months.
In another report, U.S. Multifamily Supply and Demand Forecasts by Metro (June 2018), Yardi Matrix warned of possible market instability within the next two years due to unbalanced supply and demand in some of the top 30 U.S. metro areas.
From the report:
Our (two-year projection) numbers forecast 440,000 units will be delivered in the top 30 metros, while we expect demand for 290,000 apartment units.
The metros where supply is expected to exceed demand include Denver, Seattle, Charlotte, Dallas, Phoenix and Miami.
Those metros that are likely to see demand overshadow supply include Los Angeles, the Inland Empire, Houston, Sacramento, New York and San Diego.
In conclusion, Paul Fiorilla, Associate Director of Research for Yardi Matrix, said:
Understanding the future demand for rental housing is critical for the multifamily industry. The questions of ‘where to build?’ and ‘how much to build?’ are important not only to forming public policy but for individual developers and lenders, as well. Looking forward, the industry needs to find ways to develop housing that is affordable without overbuilding in a way that disrupts business models.
For a look at the complete reports, visit www.yardimatrix.com.