Rents Rise Modestly As Interest-Rate Hikes Take Center Stage

Rents Rise Modestly As Interest-Rate Hikes Take Center Stage

Multifamily asking rents rose modestly moving up a bit in October, according to the October National Multifamily Rent and Supply Report from Yardi Matrix, as everyone is watching the Federal Reserve’s big increases in short-term interest rates.

“The Fed’s actions have roiled the housing market, which is sure to impact multifamily demand, property values and investment strategies,” the report says.

While overall multifamily asking rents continued to decline in October, there was a small increase over the previous month in the average U.S. asking rent. This slight increase was seen in a few markets led by New York (0.8 percent), Indianapolis (0.7 percent), Kansas City (0.6 percent) and Portland (0.5 percent).

“These metros benefit from low levels of new supply that are less than the national average,” Yardi Matrix said.

Highlights of the report:

  • Multifamily rents rose modestly in October amid weakening demand and decelerating year-over-year growth. U.S. asking rents increased $3 in October to $1,727. Year-over-year growth fell to 8.2 percent, the lowest level since the summer of 2021.
  • The deceleration in asking rents remains gradual, as every one of the Matrix top 30 metros produced year-over-year rent increases. But there are worries about how the multifamily market will react to the rapid increase in short-term interest rates as the Federal Reserve attempts to reduce inflation.
  • The single-family rental market is cooling from its recent red-hot performance. The average U.S. asking rent was unchanged at $2,088 in October, while the year-over-year increase fell by 160 basis points to 6.6 percent.

On the supply-and-demand side

“The multifamily market has changed dramatically in recent months. Rising rates have weakened demand and rent growth, while transaction activity is slowing as market players gauge how far values are dropping.”

The Fed’s aggressive moves to contain inflation have led commercial real estate investors to downgrade the economic outlook, increasing the likelihood of a recession and the expected depth of that downturn.

Lease renewals continue to decline

National lease renewals fell in September to 60.2 percent, continuing a slide from the peak of 68.0 percent in the fourth quarter of 2021.

The lower renewal numbers reflect a general weakening of overall demand and waning levels of affordability.

Get 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.

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