Multifamily rent growth finally took a turn downward in November due to the economy softening, demand for apartment units slowing and rising interest rates, Yardi Matrix says in their November National Multifamily Report.
“The average U.S. multifamily rent fell $9 to $1,719 in November, the largest one-month decline in rents in well over a decade,” Yardi Matrix writes in the report.
- All of Yardi Matrix’s top 30 metros continue to display positive rent growth year-over-year, though more recent performance shows some weakness.
- Almost two-thirds of the top 30 had negative growth over the last three months and more than 90 percent had negative growth over the last month.
- The single-family rental market is following the same pattern. The average U.S. asking rent dropped $5 in November to $2,091, while the year-over-year increase fell by 80 basis points to 5.9 percent.
Deterioration in rents not unexpected
The rent decline is not necessarily a signal of a deep recession, the report says.
“Rent increases have far exceeded normal growth patterns for nearly two years. Average asking rents increased by 22 percent nationally between January 2021 and October 2022, a rate that would be unsustainable under optimal conditions.
“Now, however, the decades-high inflation rate has left household balance sheets in a weaker position than a year ago, while economic growth is slowing as the Federal Reserve raises interest rates,” Yardi Matrix says in the report.
Renewing leases is a focus now
“National renewal rents continue to show strength, increasing 11.1 percent year-over-year through September, up slightly from August, as property owners were still in the process of bringing rents of existing tenants closer to asking rates.
“However, as asking rates for new tenants have turned negative, the growth in renewal rents will certainly slow in coming months,” the report says.
Slowdown in transaction activity
“Property sales, a big source of originations, have come to a screeching halt as the bid-ask spread has widened,” the report says.
Another sign of the slowdown is that “government-sponsored enterprises Fannie Mae and Freddie Mac may not lend all the capital allocated to them by the federal government.” This also slows refinancing.
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.