Supply Growth Pushes Multifamily Rents Down

U.S. multifamily rent growth has turned negative, as strong supply growth eroded rent gains in many fast-growing Sun Belt metros

U.S. multifamily rent growth has turned negative, as strong supply growth eroded rent gains in many fast-growing Sun Belt metros, Yardi Matrix reports.

However, the report says despite negative rent growth, demand for apartments remains robust, “in line with the surprisingly strong economy and with homeownership increasingly out of reach as mortgage rates soar.”

Job growth may be slowing

The report says that while the economy continues to produce solid results, market attention is focusing on the seeming inevitability of slowing job growth and the capital markets conundrum of higher interest rates.

The longer rates stay in the 4.5% to 5% range (or higher), the more multifamily properties will face capital gaps when loans come up for refinancing.

Will apartment demand slow?

There is concern that apartment demand will slow if the economic growth turns negative in line with consensus forecasts.

A downturn would likely reduce renter activity. At the same time, multifamily demand is boosted by long-term trends that aren’t likely to fade. The cost gap between renting and homeownership has rarely, if ever, been higher, which keeps renters in apartments.

Demand is also created by the hybrid work trend as people seek more space for work.

Negative rent growth but strong absorption

Absorption remains strong in many markets such as Austin, Phoenix, Orlando, Raleigh, Charlotte and Nashville, while rent growth is negative.

Rents are receding in these metros due to the robust delivery pipeline and rapid rent increases in recent years that have reduced affordability.

Some highlights of the report

  • The U.S. economy grew at 4.9% in the third quarter, an unexpectedly high rate, led by consumer spending.
  • Multifamily rents have decelerated in 2023, due in part to the robust supply response to strong demand for housing.
  • Multifamily starts are dropping as deals don’t make economic sense right now, which could lead to more rent growth in coming years.


New multifamily and single-family starts are dropping, Yardi Matrix says in the report. This could set up another demand/supply imbalance and higher housing inflation after the supply surge ends.

“This is not to say the Federal Reserve was wrong to raise rates, which were too low for too long. But the effort to manage lower inflation without a downturn is difficult and carries with it unintended consequences, which are being felt in the economy and commercial property market,” the report says.
Read the full 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.