Despite a first quarter that showed little rent gains, March did come through with a slight uptick in rent gains in some markets, according to the Yardi Matrix report.
“Multifamily demand held up well despite the attention given to the Federal Reserve-induced economic slowdown, bank failures and the deceleration from the outsize rent gains of the last two years.
“Rents and occupancy are stable as the market heads into the growth season,” writes Yardi Matrix in the report.
Highlights of the report
- With demand remaining firm, multifamily rents rose slightly in March. The average U.S. asking rent rose $3 in March to $1,706. Year-over-year growth fell to 4.0 percent nationally, 90 basis points less than February and the lowest level since rents started an unprecedented climb in April 2021.
- Although financial markets remain volatile due to the collapse of two banks in 2023 (there were none in 2022), multifamily property fundamentals are stable. Rents and the national occupancy rate were unchanged during the first quarter of 2023, and 21 of the top 30 Matrix metros recorded rent gains in March.
- Single-family rental rates increased in March by $5 to $2,079, while the year-over-year increase fell by 80 basis points to 2.8 percent. Occupancy rates decreased in February by 10 basis points, but remain strong at 95.5 percent.
Watching for the impact of interest rates later this year
With inflation still an issue and uncertainty with potential interest rates continuing to rise, “affordability (is) a growing concern” that the consumer may be “constrained by high inflation.”
“It is likely that rent growth in 2023 will be modest,” Yardi Matrix writes. “Yet a multifamily hard landing is not yet in the cards, since household formation is still boosted by the tight job market.”
Also, high prices for single family homes and increasing mortgage rates “are keeping homeownership out of reach for some renters.” Meanwhile, “consumer balance sheets remain strong (for now). The big question continues to be how the economy will react to sharp interest rate increases.”
Yardi Matrix says many renters have the wherewithal to afford increases at lease renewal time and that demand “is not falling as significantly as feared, and that tenants looking to move to reduce their monthly charges have limited options in many metros”
National lease renewal rates were 63.9 percent in January, down from 65.2 percent in December. “Renewal rates have been very consistent over the past year, both nationally and on a metro level. That could change as a wave of supply comes online if absorption does not stay positive,” Yardi Matrix says 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.