Multifamily faces a number of challenges heading into 2023, but all indications are that apartment demand will remain strong and the outlook generally is positive, according to Yardi Matrix Winter 2023 Outlook.
Multifamily rent growth has been slowing since the fall and faces the following issues.
- A softening economy
- Slowing migration
- Issues with affordability
- Pricing uncertainty
- Higher mortgage rates
“Nonetheless, Yardi Matrix expects that apartment demand will remain strong and the outlook is generally positive,” the report says.
Exceptional rent growth the previous two years, including 6.4 percent in 2022, is ending and will return to more normal patterns.
“This year we foresee rent growth dropping in half to 3.1 percent as demand lessens and deliveries remain high. Factors that drive demand include less migration, fewer new households and declining affordability,” Yardi Matrix writes in the report.
“The bottom line is we expect rents will be propped up by the lack of housing options while single-family development declines and first-time homebuyers are frozen out. Meanwhile, property owners will continue to bring renewal rents closer to the rates on new leases.”
More new apartments coming
More new apartments continue to be built, which will impact rental rates as more units become available to renters.
“The robust pipeline of projects under construction will ensure a sizeable number of deliveries. Our forecast calls for 440,000 new deliveries this year, an increase in stock of 2.9 percent,” the report says.
“ The 1 million units under construction in January under normal circumstances would produce close to 500,000 units coming online. But the time between start and completion of projects has lengthened considerably due to shortages of materials and labor,” Yardi Matrix reports.
Slowing migration between metros
“The post-COVID-19 surge in migration from high-cost coastal markets to Sun Belt metros is cooling. Although that migration to the Sun Belt predates the pandemic and will continue, it has decelerated in some locales.
Some Sun Belt markets such as Austin and Miami continue to see strong migration and job growth, but others such as Phoenix, Las Vegas and Sacramento are seeing demand wane,” Yardi Matrix writes.
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.