Another significant trend in the latest NMI is the outperformance of secondary markets over better-known metro areas in their region. The Inland Empire came in at #8, beating out Orange County at #18. Similarly, Orlando came in ahead of all other Florida markets, including Miami, in the NMI, while Raleigh (#17) came in ahead of the four Texas markets.

“Strong employment growth and tight vacancy stand out in these secondary markets and placed them higher in the Index,” according to the IPA 2018 Multifamily US Investment Forecast. “In addition, these slightly smaller markets have nimbler economies that have been able to adjust faster in the tightening employment environment and have maintained household growth despite housing conditions. Other notable standout markets included Phoenix (#12), which has an expanding economy that continues to attract a high percentage of new households with a high propensity to rent, and Denver (#13), which persists in producing rent growth well above the national average.”

The NMI ranks 46 major apartment markets on a collection of 12-month, forward-looking economic indicators and supply-and-demand variables. The index ranks markets based on their cumulative weighted-average scores for various indicators, including projected job growth, vacancy, construction, housing affordability and rents.

Weighing both the forecasts and incremental change over the next year, the NMI is designed to show relative supply-and-demand conditions for multifamily at the market level. However, Marcus & Millichap cautions that the index is not designed to predict the performance of individual investments, since a well-chosen property in a lower-ranked market can outperform a bad choice in a top-ranked one.