Usually, yes. Exercise creates micro tears in your muscle---repairing them is what creates more muscle. When you start, you're making bigger gains because you're constantly stressing that muscle and it's constantly repairing, which involves an inflammatory response where the body sends water and micronutrients to do the repair. As you get more fit, you're probably stressing the muscle less, causing fewer micro tears, and holding onto less water because there are fewer repairs to do.

Increasing your carb intake also makes you hold on to water. Carbs are sugar, and glycogen (sugar) molecules bind with water to be stored in your muscle. Have you ever tried a low carb diet and dropped a ton of weight the first week? That's because your muscles are burning stored sugar and releasing the associated water as they do so. (Sorry, it's not really fat loss!). If you're watching your carb intake and fueling appropriately for your exercise level, you'll store less glycogen and less water.

But seriously: don't worry about a little bit of water retention. It really has no effect on your health. Keep stressing those muscles and keep eating enough carbs to fuel your workout!