U.S. multifamily advertised rents rose $5 in March to $1,750, signaling an improvement as the market enters the critical spring leasing season, but growth remains weak, Yardi Matrix writes in the March report.
After several months of muted rent growth, March saw a broad-based improvement, with nearly all markets—including most high-supply metros—posting gains.
“Rents typically begin accelerating in March, ahead of peak summer moving activity. So, this month’s short-term rent gains, which were broadly distributed across markets, suggest early signs of seasonal momentum. However, the 0.1% year-over-year increase remains the weakest March growth on record dating back to 2012,” Yardi Matrix says in the report.
The report says the Iran conflict has introduced an additional drag on economic activity, posing downside risks to growth while adding renewed pressure on inflation.
There is also a strong impact on interest rates as a result of the conflict as rising geopolitical tensions—and their impact on global energy markets—have shifted expectations toward a prolonged “higher-for-longer” rate environment as the Fed remains focused on containing inflation. “Bond markets reinforce this shift, with weak demand at recent U.S. Treasury auctions signaling that investors are requiring higher yields. As a result, borrowing costs are rising, directly impacting commercial real estate through tighter financing conditions and continued pressure on asset valuations,” Yardi Matrix says.
Impact on renters’ ability to handle any rising rent increases
If the conflict persists, elevated energy prices could place sustained pressure on household formation.
“Affordability pressures are already elevated, and higher energy costs—particularly at the pump—erode discretionary income and disproportionately impact lower-income households, further limiting renters’ ability to absorb rising housing costs,” the report says.
Disrupting trends bear close watching
“Consumer spending growth is concentrated in the upper third of the income distribution, while lower-income households are struggling with inflation and social spending cuts.
“Meanwhile, with reduced immigration and a steadily declining birthrate, population growth is stagnating. All of these issues will have a disparate impact on demand for commercial properties depending on property segment and region, making it crucial for market players to strategize accordingly,” Yardi Matrix says.
Read the full report here.
About Yardi Matrix
Yardi Matrix researches and reports on multifamily, office and self-storage properties across the United States, serving the needs of a variety of industry professionals. Yardi Matrix Multifamily provides accurate data on 18+ million units, covering more than 90 percent of the U.S. population. Contact the company at (480) 663-1149
