Winter Seasonal Slowdown Stalls Multifamily Rent Growth

Winter Seasonal Slowdown Stalls Multifamily Rent Growth

Rent growth and multifamily demand for housing remains strong and consistent despite a seasonally driven $3 decline in the average rent in November, according to the latest report from Yardi Matrix.

Average rents fell slightly in November to $1,473 per month as the winter seasonal slowdown starts to take hold.

Rents are up 3.1 percent year-over-year and have been at 3.0 percent or higher since the spring of 2018, which demonstrates the strength and consistency of demand, the report says.

The seasonal slowdown is expected to continue through early 2020, but substantial demand for multifamily housing remains, and rent growth will likely accelerate again in the spring.

Seattle continues to see negative growth in the winter

  • With 320,000 units absorbed to date, this is the sixth straight year with more than 250,000 units absorbed.
  • Rent growth remains strong across the board, with metros in the Southwest, Southeast and California dominating the top 10 of the rankings.
  • The Pacific Northwest shows seasonal weakness in several metros, with three-month drops of 0.4 percent or more in Seattle, San Francisco and San Jose.

Seattle – along with San Jose and San Francisco—posted sharply negative growth over the last three months. For reasons that are not entirely clear, these metros have developed the same pattern of larger-than-average seasonal changes in recent years, with high growth in the summer and rent declines in the winter, according to the report.

“Overall demand in all of these markets remains extremely high, and none have extreme winters, so the pattern doesn’t have an obvious explanation,” the report says.

“Rents may be affected by new deliveries that tend to come online in the fall. Job growth and in-migration continue to be strong in the Pacific Northwest, so we would expect rent gains to pick up again in the New Year.”

Winter Seasonal Slowdown Stalls Multifamily Rent Growth

Phoenix, Las Vegas and Sacramento tops in rent growth

The Southwest and West continue to exhibit the highest rent growth, producing the strongest gains. Job growth and strong in-migration continue to fuel the desert Southwest.

  • Phoenix 7.5 percent
  • Las Vegas 6 percent
  • Sacramento 5.3 percent

Despite anxiety, multifamily rent growth Is forecast by employment, occupancy and supply

“Commercial real estate performance has been stellar for about eight years and demand is strong, and rents continue to grow in most segments.

“At the same time, property values are at all-time highs and debt markets are functioning smoothly, with healthy deal flow and few delinquencies.

“The industry, however, isn’t used to lengthy periods of uninterrupted success, which leads to anxiety about the other shoe dropping,” Yardi Matrix says in the report.

  • Nearly a decade into a very positive cycle for commercial real estate, many in the industry are wondering how long it can last and looking for signs of weakness.
  • Although transaction underwriting and debt levels are not as frothy as they were in 2006-07, investors are getting very little premium for high-risk assets such as value-added properties and mezzanine loans.
  • Market players should keep abreast of the possible economic headwinds and develop strategies to deal with such events.

It is a hard time for businesses to plan when there is so much uncertainty about government rules and regulations.

“With the next presidential election a year away, policies could change soon. For the time being, however, the economy remains set to expand at a 2 percent plus real rate, enough to power the real estate expansion forward,” Yardi Matrix says in the report.

Recent Yardi Matrix report:

Rents Rise, As Do Political Pressure and Rent Control

About Yardi
Yardi® develops and supports industry-leading investment and property management software for all types and sizes of real estate companies. Established in 1984, Yardi is based in Santa Barbara, Calif., and serves clients worldwide.

Yardi Matrix is the industry’s most comprehensive business development and asset management tool for investment professionals, equity investors, lenders and property managers who underwrite and manage real estate investments in multifamily, industrial, office and self-storage. Email, call 480-663-1149 or visit to learn more.

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