By Mary Salmonsen (MultiFamilyExecutive.com Article) —
The national average multifamily rent fell by $1 in December 2019, down to $1,474 at the end of the year, according to Yardi Matrix’s latest Matrix Multifamily National Report. Year-over-year rent growth fell by 10 basis points to 3%—marking a solid performance for the year, according to Yardi.
Year-over-year rent growth remained between 3% and 3.3% throughout 2019. Deliveries for the year total an estimated 300,000 new units, and the occupancy rate for stabilized properties was 94.9% in November. (Occupancy rates are current to the previous month.) The job market averages 180,000 new jobs per month, and the unemployment rate stands at 3.5%.
Out of the top 30 metros in Yardi’s ranking, Phoenix ranked first for rent growth in 2019 at 7.7%, followed by Las Vegas at 5.4%. Phoenix and Las Vegas have been the top two markets for rent growth since September 2018, when they took second and third place after Orlando.
Growth has accelerated in some markets considered mature, such as in Philadelphia (3.9%), Washington, D.C. (3.8%), and Boston (3.6%). However, some markets saw rent growth decelerate over the course of 2019, including Orlando (down to 1.3% from 5.2% in January), San Jose (down to -0.3% from 4.7%), and San Francisco (down to 1.6% from 4.5%).
Yardi notes the Bay Area is weakening due to startup growth and a lack of affordable housing, which is prompting large employers to move elsewhere. However, despite affordability concerns and recent rent control measures, three California markets are listed in the top 10 for this year—Sacramento (5.1%), the Inland Empire (4.1%), and Orange County (3.9%).
Rent growth was flat in December on a trailing three-month basis, which compares the last three months of rent growth with the previous three months. Phoenix showed the most growth at 0.5%, followed by Orange County and Sacramento at 0.3%. Philadelphia is a new addition to the top five at 0.2%, owing to a lack of new supply.
Sixteen of the nation’s major metros experienced negative T-3 rent growth, with San Jose at the bottom at -0.8%, followed by Denver at -0.5% and Orlando at -0.4%. Yardi notes that Orlando and Denver’s population growth has fallen off recently, possibly owing to affordability issues.
Multifamily development continues to benefit from debt capital. About $168 billion in multifamily loans were originated from all sources in the first half of 2019, with apartment lending due to reach 2018’s record $338 billion, according to Yardi. Fannie Mae and Freddie Mac are still the leading providers, but the CMBS market has more than doubled its origination of multifamily loans in 2019, with $12.5 billion in loans securitized. Yardi attributes this change to the drop in Treasury spreads in 2019, which made CMBS loans more competitive against other loan types, as well as newly mandated hard caps on Fannie Mae and Freddie Mac’s lending.