Q2 Apartment Rent Numbers: Reading Between the Lines (and Trying to Get Local)

Last week I was troubled by this section of the NMHC Q2 Market Trends report regarding Apartment Rents, which stated very clearly that one index showed record breaking declines and the other index showed the biggest increases in 55 years:

"Apartment rents measured by public and private data sources continued to diverge widely.  Same store rents for professionally managed apartments tracked by M/PF Research declined by 3.4 percent, the biggest decline on record.  Rents continued to decline in all four regions for a second straight quarter.  (Note that since overall inflation was negative in the quarter, the "real" rent decline was smaller at  -2.2 percent.) The West had by far the largest decline at -6.5 percent, while smaller declines were posted in the Northeast (-2.1 percent), the Midwest (-1.8 percent), and the South (-2.0 percent).  In contrast, the CPI rent index, which covers all rental housing, not just apartments, rose by 2.9 percent in the second quarter.  This was the lowest such increase in over four years. Coupled with the negative inflation of the quarter, however, "real" rent actually rose by a startling 4.1 percent, the highest in 55 years."

 To me, since the M/PF sample is comprised of investment grade apartments and the CPI rent index includes all rental housing, but only in urban areas, it would seem that rent gains are occurring in affordable urban areas compared to falling demand suburbs or exurbs.

 For example, for Washington, D.C. apartments, relative demand for apartments and row houses in the U Street, Shaw, Columbia Heights and H Street has increased much more than demand for luxury high rise apartments in Clarendon, Arlington, Ballston and Alexandria.

We've seen this trend before and would like to know from some Multifamily Insiders where they see a zero-sum rental demand shift in cities around the country.