Switching gears, as far as supply goes, Adler said that from the day they have been tracking the under construction, the total pipeline has leveled out. “Deliveries will hit a crest this year so there will be a certain amount of localized pain, but if you look at demand, we are still in a great place with supply and demand.”

Adler said that he is already seeing some weakness in some markets that will feel pain, but it is just a return to a little normalcy. “And the fact that the supply pipeline isn't growing as we go into this is amazing.”

Rice added that deliveries in 2017 will be peaked so it will be a tough year for the markets that have a large supply. She pointed to markets like New York, Dallas, Houston and Atlanta as examples, but said that by 2018, the balance starts going the other way. “A little over a year ago, starts started to decline and that is continuing. It is different in every market though.”

Adler agreed that there will be pockets of pain as high end new supply comes in but future rental demand looks strong.

Rice agreed that the demographic trends look good. “Although we have to remember that Millenials are turning 37 this year which puts half of them already in their 30s, and they are still predominantly renters.” But many are buying homes and moving out, she added.

But with that said, Rice pointed out that the younger ones are coming in and there isn't a big drop off between Millenials and Gen Z. “We are still looking at a lot of folks still coming into rentals, but it will be slower than in the past. I still believe in strong rental demand and the urban renaissance will still continue for many different reasons. It is a really strong story. And the suburbs will remain strong as well.”

SAN DIEGO—Inflation looks like it is finally getting up to the 2%, according to NMHC Apartment Strategies Outlook Conference moderator Mark Obrinsky, SVP of research and chief economist at NMHC, but what will come out of 2017? He posed the question to panelists at last week's event, where Jeff Adler, VP of Yardi Matrix, said that the big pop has likely already happened.

“What has been holding down inflation has been goods. Things like oil, manufacturing goods etc.,” said Adler. “I do think you get up to 2%, but I don't see where you get to 4%, 5%, 6% inflation.” According to Adler, he cannot the shortage of demand to generation that. “As long as we have a positive yield curve, I see it as a headwind, but I don't see it becomes a game changer.”

Jeanette Rice, Americas head of multifamily research at CBRE, said that inflation that we are looking at now isn't like double digit increases. “If the economy is growing, inflation and higher interest rates aren't in of themselves bad. We are still in a really favorable rate environment, but for the economy, it isn't bad.”

Rice said that the Fed will likely tweak the rate three times and might end the year closer to 3%. “That number seems high because we haven't been there for a while, but it isn't, and is supported by a stronger economy.”

Switching gears, as far as supply goes, Adler said that from the day they have been tracking the under construction, the total pipeline has leveled out. “Deliveries will hit a crest this year so there will be a certain amount of localized pain, but if you look at demand, we are still in a great place with supply and demand.”

Adler said that he is already seeing some weakness in some markets that will feel pain, but it is just a return to a little normalcy. “And the fact that the supply pipeline isn't growing as we go into this is amazing.”

Rice added that deliveries in 2017 will be peaked so it will be a tough year for the markets that have a large supply. She pointed to markets like New York, Dallas, Houston and Atlanta as examples, but said that by 2018, the balance starts going the other way. “A little over a year ago, starts started to decline and that is continuing. It is different in every market though.”

Adler agreed that there will be pockets of pain as high end new supply comes in but future rental demand looks strong.

Rice agreed that the demographic trends look good. “Although we have to remember that Millenials are turning 37 this year which puts half of them already in their 30s, and they are still predominantly renters.” But many are buying homes and moving out, she added.

But with that said, Rice pointed out that the younger ones are coming in and there isn't a big drop off between Millenials and Gen Z. “We are still looking at a lot of folks still coming into rentals, but it will be slower than in the past. I still believe in strong rental demand and the urban renaissance will still continue for many different reasons. It is a really strong story. And the suburbs will remain strong as well.”