Multifamily rent growth was flat nationally in August as demand kept up with supply, according to market research company Yardi Matrix.
“Rent growth is expected to remain lackluster through year-end. Momentum is slowing across most metros, as only a few markets recorded more than 3% year-over-year growth,” according to the monthly report.
The slowdown in rents is primarily driven by too much supply rather than demand for rentals.
“However, supply pressures are beginning to ease, with most metros past their peak supply and new starts declining sharply due to the cost of construction and tighter financing,” the report says.
Highlights of the report:
- Multifamily rents changed little in August due to seasonality and rising uncertainty about consumers’ financial health. The average U.S. advertised rent fell $1 to $1,755 in August while year-over-year growth fell 10 basis points to 0.7%.
- After two years of extraordinary gains following the pandemic, rents nationally have settled into a slow-growth pattern over the last three years in which increases are moderate and mostly limited to the spring. If the pattern holds, rents will change little in coming months.
- Single-family build-to-rent advertised rates were unchanged in August, but stood at a record high of $2,208. Rent growth is at least 5% year-over-year in Chicago, Kansas City, Twin Cities and Columbus and negative in high-supply markets including Austin, Tampa, Raleigh and Denver.
- Consumer budgets are tightening due to rising costs and the softening job market.
Interest rates and labor market
Possible interest rate cuts by the Federal Reserve are not likely to be enough to turn around the home-sale market.
“As a result, many prospective buyers will remain renters, supporting multifamily demand,” the report says.
Price increases may happen in coming months as they are filtered through supply chains and distribution networks. While layoffs remain muted, the labor market remains delicate.
Governments Are Trying to Help
- The growth in housing costs in recent years has spurred legislators at all levels of government to act to create more housing supply.
- Hundreds of pro-housing bills have been introduced in states this year, dozens of which are now law in states such as California, Texas and Michigan.
- While the legislative efforts are a positive start, they come at a time when apartment starts are dropping and the impact could be years away.
Read the full report from Yardi Matrix here.
