SANTA BARBARA, CA—US multifamily rent growth this year is falling short of the levels seen in recent years, with May perhaps being an inflection point.

According to a new report by Yardi Matrix, average rent, which reached $1,442 in May, grew $14 over the last three months, for a year-to-date increase of 1.2%—a decent performance but far short of the levels of recent years. Indeed, last month was one of only two Mays in the last six years in which year-to-date rent growth fell below 2%, Yardi Matrix says.

One reason for the drop in growth is that new supply is depressing rent increases in some cities, including Denver, Seattle and Kansas City, Mo. This can be seen in the occupancy levels of stabilized properties, which have dropped slightly—down by 30 basis points to 94.9% year-over-year through April. Yardi Matrix highlights Houston as an example: its occupancy rate was down more than 100 basis points to 92.4% last month. “Although the metro's job growth remains strong and deliveries have moderated post-Harvey, Houston's 0.4% rent growth as of May has it wallowing at the bottom of the metro rankings,” the report said.

2019 is Shaping Up as a Weak Year

Also, this trend is not limited to the month of May. In general, 2019 is shaping up to be weaker than the last few years, according to Yardi Matrix. Year-over-year rent growth has dropped 80 basis points over two months and 110 basis points over three months. Overall, rents were up 1.2%—which again, is good but not up to the recent past. In fact, over the last six years, only in 2017 when posted growth was 1.7%, did rent growth fail to reach 2.0% year-to-date through May.

The last year in which rents rose less than 1.2% through May was 2011, when the economy was pulling out of the recession.

All of this is noteworthy, Yardi Matrix says, because the bulk of rent growth tends to occur in the first half of the year. “If the past is any guide, 2019 would be hard-pressed to continue the bullish outcomes of the last six years if things don't improve quickly,” it says.

“Most Markets Are In Good Shape”

However it's too soon to draw conclusions from one moderate season of rent increases. Yardi Matrix points out that rent growth slowed below 3.0% for most of 2017 before rising back again through most of 2018 and early 2019.

“Most markets continue to be in good shape, with only a handful producing rent growth of less than 1.5% year-over-year,” according to the report.

Phoenix, Las Vegas, Sacramento, Calif., Atlanta and California's Inland Empire were the year-over-year rent growth leaders in May.