The multifamily outlook is still hopeful as rent increases are starting to slow as rent growth is getting moderated by soaring inflation, Yardi Matrix says in a summer report.
So the outlook is still hopeful for the rest of the year, but shows multifamily may have reached a point where potential change is coming in what has been robust growth, the report says.
The report says the economy “features some strong fundamental metrics that are being overshadowed by inflationary pressures that stem from soaring energy and housing prices, global supply-chain issues, and the hangover from post-COVID-19 monetary expansion.”
However, the report points out that the economic picture “is not bleak for multifamily” as job growth and consumer spending are still strong, and debt service low by historical standards.
“All these economic measures contribute to strong growth in household formation and demand for multifamily,” the report says.
Multifamily outlook still hopeful some highlights of the report:
- Growth will decelerate in the second half, but the question is by how much, as persistently high inflation threatens to roil the economy.
- The Federal Reserve’s bid to reduce demand through rising rates and quantitative easing will cut growth, with the odds of a recession in 2023 or 2024 increasing rapidly in recent weeks.
- Multifamily rents are decelerating from 2021’s record highs but remained at double-digit percentage growth levels through mid-year. “We expect average asking rents to increase by 7.9 percent by year-end.”
- Lenders are becoming more conservative, focusing on cash flow rather than income growth. Many investors and lenders are taking a step back to digest where the market is headed before they resume activity.
Rent Growth Will Moderate Later In 2022
“Coming off record-high rent growth of 14.7 percent in 2021, deceleration in multifamily rents in 2022 was inevitable, but the question was how much?
“Rent growth has started to come down, but slowly as the conditions that produced strong gains have persisted. Average national asking rents increased 5.7 percent in the first six months of the year. Year-over-year rent growth at the year’s midpoint was 13.7 percent, down 100 basis points from the end of 2021 and 150 basis points from the February peak of 15.2 percent.
“While growth is moderating, we expect gains will continue to remain well above trend, with average asking rents increasing by 7.9 percent nationally by the end of 2022,” the Yardi Matrix report says.
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.
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