Multifamily rents were up slightly in April “but less than previous years and in line with our forecast deceleration,” Yardi Matrix writes in the April report.
“Demand remains stable despite the slowing economy and tighter loan underwriting standards that will likely increase distress,” Yardi Matrix writes.
Highlights of the April Multifamily Rents Report
- The multifamily market continues to display resilience in the face of headwinds, as rents increased for the second straight month in April. The average U.S. asking rent rose $5 in April to $1,709, while year-over-year growth decelerated to 3.2 percent, down 80 basis points from March.
- Rent growth is broadly positive nationally, but regional differences are emerging. High-demand Sun Belt metros are feeling the impact of reduced affordability and robust deliveries, while primary metros have less supply growth and some benefit from rebounding immigration.
- Single-family unit rents hit a new all-time high of $2,089 in April, but year-over-year rates once again decelerated, dropping 60 basis points to 2.3 percent. Occupancy rates decreased in March to 95.5 percent, but have stabilized after peaking at 97.0 percent in 2021.
“Early indications at the start of the spring confirm our forecast for moderate rent growth in 2023,” the report says.
While demand for rentals have been supported by a strong job market and strong consumer spending, it is unclear how long those conditions will continue.
Other factors that will impact rents and rent growth:
- Economic growth is likely to ebb in coming quarters
- A slowdown in housing sales and construction due to higher interest rates
- Dwindling post-pandemic consumer savings
- A squeeze on credit as banks try to de-risk loan portfolios
- The reduction of the Federal Reserve’s balance sheet
Yardi Matrix says as affordability remains a major factor for tenants rent growth will likely be increasingly concentrated in renter-by-necessity properties (5.1 percent year-over-year, 0.3 percent trailing three months) relative to luxury lifestyle properties (1.5 percent year-over-year, 0.1 percent trailing three months).
Lease Renewal Rents Persist At High Rates
Renewal rent growth nationally was unchanged in February, remaining high at 9.4 percent year-over-year.
Renewals represent the increases for tenants that are rolling over existing leases, which typically lag growth in asking rents of vacant units. U.S. asking rent growth dipped to 3.2 percent year-over-year through April, “so renewal rents will eventually decline, as well.
Renewal lease rates persisting so high is an indication of the outsize increases for new leases and the lack of supply, as tenants that wish to move into units with a lower rate have limited options,” Yardi Matrix 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.