Multifamily Sector's Effective Rents Averaging 4.4% YTD Increase
It's a sign of the times, with effective rents for the multifamily sector climbing 0.54 percent in the past month for a year-to-date increase of 4.42 percent, according to the latest report by Dallas-based Axiometrics Inc.
The new report is closely aligned to housing reports that show home ownership is declining despite record-low mortgage rates. The national occupancy rate is 94.33 percent, up nearly three-quarters of a point year to date over last year.
The annualized effective rent growth has moderated from the peak of 5.32 percent in July 2011. The impact of new deliveries on rent growth has yet to slow rent growth. However, deliveries are accelerating, with 56,000 units coming on line in 2012 and an estimated 129,000 units delivering in 2013, of which 89,000 will hit before April. Axiometrics is tracking nearly 311,000 units that are under construction.
"Interestingly, new supply is also just now really starting to hit the market in a big way, so at this point it can’t be faulted for the moderation in rent growth, especially as some markets—like Houston, Southeast Florida, Nashville, and Denver—are actually seeing growth rates higher than they were a year ago," said Ron Johnsey, president of Axiometrics.
The research firm is predicting the year will end at 4.1 percent to 4.3 percent effective net rent growth once the seasonal slowing takes place in the last quarter. Axiometrics is forecasting the market will most likely perform "closer to the extended period of stable rent growth seen in the late 1990s rather than the 'up and down' market seed during the immediate last expansion period."
REIT properties, accounting for 12 percent of Axiometrics' database, continue to outperform the marketplace. That sector's rent has climbed 6.46 percent year to date. For the same period last year, REIT properties showed 6.35 percent growth in rents. However in 2011, REIT properties lowered rents each month from August to December, thus the July results could be the peak YTD growth rate seen for them the rest of this year.
On the occupancy front, class A and class B properties are hovering 95 percent while class C properties have had the most year-over-year growth.
Axiometrics' research shows Corpus Christi showed the greatest improvement with its rents spiking 7.7 percent from 3.22 percent in the past year. Six other markets reported increases of at least 2 percent since July 2011. Markets at the bottom of the list showed a steep decline in performance although six of the last 10 posted overall positive annual growth.