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AXIO Market Madness: Round of 16

Many Smaller Markets Emerge

By Carl Whitaker | Wednesday, March 22, 2017


In this series of blogs, Axiometrics has compiled a “Field of 64” in the spirit of the annual NCAA Division I basketball tournaments.

Each of the top 64 metros was ranked based on their cumulative rent growth from 2010-2016 and is represented by a total percent growth over that time. The 2010-2016 effective rent levels represent the market’s annual average rent for each of those years. Each of the metros was assigned a geographic region similar to the NCAA tournament itself respective to its best-corresponding region.

The individual matchups themselves take into account annual effective rent growth as of February 2017, according to Axiometrics apartment data. The metro with the highest annual effective rent growth in February 2017 will go on to the next round, eventually crowning an apartment market bracket champion.

The format below includes the metro’s seed in parentheses (1 to 16) and the metro’s name.

Read the first-round results here and second-round results here.

Download a printable bracket here.


North Region

Detroit (8) vs. Colorado Springs (4): Detroit’s relative strength was discussed in our previous analysis as potentially surprising for some readers, but even the market’s current success falls short compared to Colorado Springs.

Colorado Springs has been one of the nation’s strongest markets over the past year, and it enjoyed an exceptional period of growth in the summer of 2016. Rent growth has moderated since December, dropping from 10.1% to 8.1%.

Colorado Springs is a small market relative to some other metros in our bracket, so seeing lower new supply totals is not necessarily surprising. Inventory growth has remained at or below 1.6% each of the past seven years, while job growth reached as high as 3.0% in 2014. This combination of low supply and healthy job growth has made Colorado Springs a success story for owners and operators in the market.

Spokane (11) vs.  Salt Lake City (7): Spokane’s 7.5% rent growth coasts past Salt Lake City’s 4.6%. Spokane is another market where excellent job growth has driven increasing rent growth, even with increasing new supply in the metro.

South Region

Fort Worth (8) vs. Nashville (5): If this was a televised game, you could be sure there would be more than a fair share of cliché footage showing BBQ joints, honky-tonks and cowboy attire. We’ll refrain from such stereotypes here, but it is fair to say Nashville and Fort Worth have had similar performances since 2010. Nashville has had 36.3% cumulative rent growth since 2010, compared to Fort Worth’s 34.1%.

The trends of these two markets have been similar, too. Nashville has been slightly more volatile, but has rarely fallen behind Fort Worth during the current cycle. Nashville’s rather extreme drop (helped in large part by the huge wave of new supply entering the Nashville market) in recent months though means Fort Worth is victorious in this matchup, surpassing Nashville’s February rent growth by a comfortable 5.4% to 2.4%.

Nashville and Fort Worth are similarly sized apartment markets (Fort Worth with approximately 180,000 units and Nashville with 142,000 units). To show the sheer amount of supply entering the Nashville market relative to the Fort Worth market, the following chart has been included.


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Atlanta (6) vs. Phoenix (10): This is a tightly contested matchup, but Phoenix emerges victorious with an 11-basis point margin.

The apartment market story in Phoenix has been different than many other markets, perhaps with the exception of Las Vegas. After the recession, new supply was slow to trickle back into the market. As job growth in Phoenix continued to gain steam (in fact, job growth ranged from 2.0% to 3.6% from 2011-2016), new supply was slow to catch up.

This lag in new supply has caused rent growth to continually increase. It should be noted, though, that job growth in Phoenix has slowed in recent months. Annual job growth as of July 2016 in Phoenix was still 3.2%. That has dropped to 1.4% as of December 2016, so Phoenix may be worth watching over the next few months to see which direction job growth continues.


East Region

The East Region’s third round is dominated by Florida metros, with Palm Bay, Orlando, and Deltona all making it through the first two rounds.

Palm Bay (1) vs. Orlando (4): The first matchup is handily won by Palm Bay with 10.5% annual rent growth. Orlando’s 4.5% annual rent growth is good by its own merit, but doesn’t hold a candle to the red-hot Palm Bay market. To find rent growth in Palm Bay comparable to current performance, you need to go back to 2015, when rent growth passed the 10.0% mark on two separate occasions – first in February 2015 then again in July of that same year.

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Deltona (6) vs. Wilmington, NC (10): This is a closer matchup, with Wilmington’s 4.4% annual rent growth emerging victorious by a margin of roughly 80 bps.

Wilmington’s advancement through the third round is impressive, considering the 10 seed it has been saddled with. Interestingly, rent growth in the market has actually been cooling off from the summer months, but the first two months of 2017 have played out favorably for the market. With the market heating up right at the beginning of tournament time, it is easy to draw comparisons to the 2002 basketball season, when a 13-seed UNC-Wilmington knocked off a 4-seed Southern California.


West Region

We’ve continually noted the West Region’s strength, and the third round continues that trend with strong metros facing off. Similar to the East Region’s domination by Florida metros, the West Region is heavily weighted to California metros.

Reno (8) vs. Santa Rosa (4): Reno yet again pulls off the upset, with the metro’s 12.2% annual rent growth defeating Santa Rosa’s 6.7%. An 8 seed making it this deep in the tournament is reminiscent of the 1985 basketball tournament, when 8-seed Villanova amazingly beat the odds to take home the title by beating favored Georgetown. Reno’s run will be worth watching in the final rounds to see if yet another 8 seed is able to seize the championship.

Riverside (11) vs. Sacramento (7): Another northern California- southern California matchup features two metros that are enjoying a period of exceptional performance. Sacramento’s annual rent growth has been above 9.0% every month since March 2015. Riverside has been remarkably consistent by its own merit, remaining above 6.0% annual rent growth each month since January 2015. In fact, you would have go to back to October 2013 to find one month where annual rent growth was below the national average for these metros.

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Sacramento has just been too hot for Riverside to compete with, however, and it’s the state’s capital city that advances to the fourth round.

So, headed to the final eight, we have only one No. 1 seed remaining and no No. 2 seeds (they feel your pain, Duke and Louisville). Here is the bracket heading into the next round.

Round 3 Results

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Carl Whitaker

Carl Whitaker

Real Estate Analyst

Carl Whitaker is a Real Estate Analyst for Axiometrics.

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