The long run of multifamily rent growth “hit the brakes” in September as the economy continued to cool, Yardi Matrix says in their monthly report.
Yardi Matrix says multifamily rents remained unchanged in September, while Apartment List reported rent declines in a number of metro markets, indicating the accelerated rent growth fueled by the pandemic has officially ended.
“After a year-and-a-half of record-setting growth, multifamily rents have hit the brakes. Asking rents have flattened this summer at $1,718 for three months in a row. That comes after rents rose more than 20 percent since January 2021,” Yardi Matrix says in the report.
Multifamily Rents September Report highlights:
- Multifamily rents were flat in September, as the market continues to decelerate along with the rest of the economy. The average national asking rent was $1,718, the same rate as August. Year-over-year growth decelerated 150 basis points to 9.4 percent. National occupancy rates remained steady at 95.9 percent.
- After five months of declining lease renewals, the lease renewal rate increased 60 basis points in August to 59.1 percent. Year-over-year renewal rent growth also increased 50 basis points, to 10.8 percent. In addition, rent-to-income ratios rose nine basis points nationally for all units in August.
- Rents decreased in the single-family sector for the second month in a row in September. The average single-family asking rent decreased by $7 to $2,081, while year-over-year growth dropped by 170 basis points to 7.8 percent. Overall occupancy also decreased 10 basis points, to 1.1 percent.
“The cooling economy is beginning to show its effect on multifamily. However, key fundamentals remain strong,” Yardi Matrix says in the report.
“Rent decreases continue to be concentrated in high-end lifestyle units, which dropped 0.3 percent nationally in September. Rents increased 0.2 percent for renter-by-necessity units and stabilized nationally for all units.
“Despite the flattening rent growth, much about the market remains positive. National asking rents are still at record highs, and national occupancy rates have been hanging around 96 percent since June of 2021.”
Yardi Matrix has two new additions to their monthly report, lease-renewal percentages and rent-to-income ratios in top metros.
- Monthly lease renewals increased in August after falling each month since February of this year. With the Fed hiking up interest rates, buying a home has grown out of reach for many, and renewal rent growth, while high, is typically lower than rent growth for a new lease.
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Charts courtesy of Yardi Matrix - National rent-to-income ratios for all units were 29.0 percent in August, 9 basis points higher than July.
Multifamily Rent-to-Income Ratios as of August 2022
Conclusion:
“The outlook for multifamily remains strong, although the market may be coming to an end of its extraordinary run of rent growth. Demand is slowing as migration and household formation drop to normal levels,” Yardi Matrix says.
Get 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.
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