The average U.S. multifamily rent fell by $1 to $1,471 in September 2019, while year-over-year rent growth fell by 20 basis points to 3.2%, according to Yardi Matrix’s latest National Multifamily Report.
So far, U.S. rents have risen 0.3% in the third quarter of 2019 and 2.9% through the first three quarters of the year. According to Yardi, full-year rent growth is on track to rise over 3% for the full year, marking the sixth time this has occurred in the last seven years.
Las Vegas leads the nation’s top metros with 6.8% YOY rent growth, followed by Phoenix at 6.1% and Sacramento at 4.7%. Boston (4.6%), Austin (4.4%), and Raleigh, N.C. (4.2%) have also experienced strong growth over the past year, owed to their growing tech sectors and demographic and economic fundamentals. The rent growth spread between luxury Lifestyle apartments (3.1%) and market-rate Renter by Necessity apartments (3.3%) has narrowed to its closest point in eight years.
Rent growth rose 0.1% on a trailing three-month basis, which compares the last three months with the previous three months, down from 0.3% growth in August. T-3 rent growth was flat or negative in 16 out of the Top 30 rental markets, one month after rents rose in all 30 markets.
Orange County was the strongest-performing market on a T-3 basis at 0.4%, followed by the Inland Empire and Los Angeles at 0.3%, while San Jose fell to the bottom of the rankings at -0.4%. Yardi notes that seasonality tends to push T-3 rent growth lower or negative in the last months of the year and considers current activity in line with this trend.
While rent growth was relatively weak for the third quarter, the multifamily sector’s slow and steady growth is expected to continue. According to Yardi, volatility in the stock and bond markets has spurred investor demand for apartments, given the sector’s steady long-term growth, strong demand, and high occupancy rates.
On Sept. 30, the Federal Housing Finance Agency announced plans to take Fannie Mae and Freddie Mac out of conservatorship and reduce their market share. The agencies have grown to a dominant position in the multifamily market since the 2008 financial crisis, originating 45% of all apartment loans over the past two years. The goal of this move, according to Yardi, is to shrink the agencies’ role in multifamily lending. However, their practices will maintain status quo in the near term, with an origination limit of $20 billion per quarter through the end of 2020.