Multifamily’s Good Times Keep Rolling

Even as rent growth continues to slow, multifamily market fundamentals in most metro areas will remains positive, Yardi Matrix said Monday. The firm’s new report, Can the Good Times Keep Rolling?, provides a mainly affirmative answer to that question, albeit with some caveats. Aside from the tapering rent growth, “transaction yields have likely bottomed and oversupply is going to negatively impact some locales,” in particular when it comes to occupancy rates, according to the Yardi Matrix report.

Looking ahead to the changing of the guard in Washington, DC, Yardi Matrix notes that the new administration and Congress “are expected to inject some stimulus into the economy in the form of tax cuts, infrastructure spending and reduction of regulations on business. That brings with it prospects for an improvement upon the moderate growth” the US economy has seen in the past several years. That being said, there are potential headwinds in the form of “the possibility of tariffs or focus on unproductive policies such as deportation.”

Following the “frothy” levels of rent growth seen two years, the pace of increases should continue to moderate. That effect will be especially announced in metro areas that experienced “unsustainable double-digit increases,” notably San Francisco and Denver, as well as in those where supply, affordability issues or weakening employment growth will put pressure on rent gains, the report states. Even so, Yardi Matrix anticipates national rent increases to be just under 4% this year, a pace that exceeds the historical trend of 2.3% and a sign of an overall healthy market.

On the supply issue in particular, Yardi Matrix notes that 2017 is expected to be another strong year for supply, with 320,000 units scheduled to come on line during the year, up 5.3% from 2016. One-eighth of those new units will be delivered in Dallas and Houston alone, while other metro areas with full delivery pipelines include Washington; DC; Seattle; Denver; and Atlanta.

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