Multifamily Rents Sliding, But Close 2023 With Slight Annual Gain

Multifamily rents extended their downward drop in December, falling for the fifth straight month, but finished 2023 with a slight annual gain

Multifamily rents extended their downward drop in December, falling for the fifth straight month, though they finished 2023 with a slight annual gain, Yardi Matrix writes in their December 2023 Multifamily National Report.

Rents are likely stuck in neutral for the first part of 2024, the report says, as 2023 ended on a downswing with the average U.S. multifamily asking rents dropping for five straight months.

The average asking rent fell $17 over those five months to $1,709.

Highlights of the report

  • The book closed on 2023 with multifamily rents producing extremely slight gains. The average U.S. asking rent fell $4 in December to $1,709, while year-over-year growth was unchanged, finishing 2023 at 0.3%.
  • Since peaking in the summer, multifamily asking rents have declined by 1.0%, but the drop is mostly a function of supply increasing in high-growth markets. Overall demand remains firm, which limits the potential downside.
  • Single-family rents outperformed multifamily in 2023, as demand has remained robust. U.S. average single-family rents declined by $1 in December to $2,123, while year-over-year growth rose 20 basis points to 1.2%.

Worried about the market in 2024?

“While it is prudent to prepare for downside scenarios, conditions may not be as weak as they appear on the surface,” Yardi Matrix says in the report.

“Maybe most importantly, household formation and the strong job market should continue to maintain demand.”

New apartment absorption has remained healthy across the country as rents have turned negative in some markets.

“And it is increasingly appearing as though the job market will hold up better than consensus expectations in the wake of the Federal Reserve’s rate hikes.

“Demand is also coming from an increase in net immigration, which fell by almost half between 2018 and 2021. Net immigration has increased by more than 1 million annually in the last two years, and is projected to remain at that level in coming years,” the report says.

Renewal lease rates have moderated

The national lease renewal rate averaged 64.4% in October.

Lease renewal rates have settled into a range, having been between 64.4% and 66.0% for the last six months. Lease renewal rates were highest in New Jersey (80.8%) and lowest in Los Angeles (45.3%).

Multifamily rents extended their downward drop in December, falling for the fifth straight month, but finished 2023 with a slight annual gain

2024 promises to be consequential for multifamily

  • The multifamily industry faces some important challenges in 2024 related to expenses, income, deliveries and interest rates.
  • The market is on track for more than 500,000 units to be delivered in 2024, but starts are slowing.
  • Recent interest rate declines are a positive development for potential distress, but owners are not out of the woods yet.

Read the full Yardi Matrix 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.