Rents were up moderately in most markets in January, when rent growth is normally slow, indicating that the multifamily fundamentals are still strong, Yardi Matrix says in its latest report.
Multifamily fundamentals appear strong as “demand drivers remain healthy, producing strong rent and occupancy performance and attracting debt and equity investors into the sector.
“Property sales, pricing and mortgage origination are at all-time peaks,” the report says.
How hot is the market?
Seasonality in rents is normal in January, a traditionally weak month for rent. However, multifamily asking rents bucked the usual trend, rising $8 during the month to an all-time high of $1,604.
It took only seven months for the average asking rent to hit $1,600 from $1,500, and only 10 months to reach $1,500 from $1,400.
Highlights of the report:
- Year-over-year growth increased to 13.9 percent, a new high and up 30 basis points over December, but that number will decline as monthly increases decelerate compared to a year ago.
- An $8 monthly increase pales in light of the $22 average monthly gains between March and October 2021, but January’s strong seasonal performance is a sign that the sector’s fundamental drivers have not been exhausted.
- Single-family rentals also started the year strong. SFR rents are up 13.5 percent year-over-year through January. The national occupancy rate increased by 0.2 percent year-over-year through January.
The report cites Freddie Mac’s 2022 strong multifamily outlook
Freddie Mac’s 2022 multifamily outlook sums up the solid circumstances. “The strong economic conditions along with unprecedented levels of demand for multifamily housing have combined to create robust apartment market conditions in 2021,” the report said.
“While there are still uncertainties, such as increasing inflation or more transmissible variants of the COVID-19 virus … the multifamily market is expected to be on solid ground in the short term.”
Capital flowing into multifamily
Yardi Matrix says multifamily capital markets conditions “are exceptional entering 2022. Investors are seeking to deploy debt and equity in assets with strong fundamentals, while property owners want to take advantage of rock-bottom interest rates.”
Added together, that has produced record-high transaction flow and prices. Acquisition yields continue to shrink even as Treasury yields rise.
“Every capital source has a really strong appetite for placing (multifamily) mortgage debt this year,” says Jamie Woodwell, vice president of research and economics for the Mortgage Bankers Association, in the report.
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.