MF Rents Hit New Peak, But Growth Slows

Portland, OR has slipped to 12th place lately among the fastest-growing apartment markets in terms of rent growth.

SANTA BARBARA, CA—US apartment rents across 111 markets reached a new peak in February, climbing an average of $7 to $1,175 per month, according to the latest monthly Yardi Matrix report. However, the report notes, “While overall rent growth is robust and fundamentals on the national level are likely to remain healthy this year, cracks are beginning to emerge in some of the top-performing markets that indicate a return to more normal growth.” Year-over-year, national rents were up by 5.9% in February, a growth figure that Yardi calls “extremely solid” but down from 6.4% a month earlier. The 50-basis-point decrease is partially a reflection of the strong gains recorded in February 2015—when rents increased by 1.0% from the previous month—“but also a sign that overall rent growth is likely to moderate this year and move closer to our forecast 4.5% increase,” according to Yardi. But Yardi cautions against making too much of this. “With year-over-year rent increases near 6% and above the long-term trend in the majority of metros, it’s difficult to be too alarmed,” according to Yardi’s report, which nonetheless notes “some areas of softness.” One concern cited by Yardi is the declining rate of growth in some of the tech-centric metro areas, including Portland, San Francisco and Denver. While these cities remain at or near the top in Y-O-Y rankings, growth has slipped in more recent months. For example Portland, OR remains the champ in rent growth over the past 12 months. In the trailing three months, though, it’s in 12th place, well behind Seattle, Jacksonville, Baltimore and Sacramento, among other markets. Yardi notes that the tech sector itself has cooled lately, “with some public offerings canceled and smatterings of layoffs.” Another area of concern Yardi sees is the energy sector, with the price of crude oil remaining near $30 a barrel. “Metros such as Houston, Denver and Pittsburgh are among the most impacted by cuts in the mining and drilling segments,” according to Yardi. “Also, though new supply is no doubt badly needed on a national basis, it is having an impact on rent growth in some markets, including Atlanta, Houston and Denver.”