Multifamily Performance Will Move Closer to Long Run Averages This Year

By Erik Sherman

Moody’s Analytics expects multifamily rent growth to slow in 2023 to less than half of the 7.8% year-over-year increase that 2022 saw, the firm said in a report.

“The increasing multifamily supply along with a softening labor market, and potentially a mid-year rebound in single-family activity, will help recalibrate the housing market and bring performance of multifamily closer to long run averages,” the firm said.

Part of this may be due to what seems a trend of inflation calming. Discussing the Producer Price Index numbers for December 2022, released January 18, in which headline PPI was down 50 basis points from November (seasonally adjusted), Moody’s wrote, “This report comes as another positive sign for the U.S. economy, and importantly the Federal Reserve, that inflationary pressures are easing. For perspective, Headline PPI was at its lowest annual rate since March 2021, when the index was at 4.1% – and is well below the March 2022 high of 11.7%.” [Emphasis theirs.]

Falling inflation, especially when it turns into a recession, has historically correlated strongly with growing labor market softness and even greater unemployment. People who don’t have income often will move in with family or into a situation with roommates to lower their expenses. Also, lower incomes among many would mean fewer people who could afford to pay more to secure an apartment.

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