Yardi Matrix: Multifamily Rents Continue to Decelerate

The average U.S. asking rent has continued to fall, down $4 to $1,709 in December, according to the latest Yardi Matrix Multifamily Report. Since August, asking rents dropped for five consecutive months, decreasing $17 in that time.

“Discounting the 2020 pandemic year’s 0.1% gain, 2023’s full-year rent growth of 0.3% was the weakest performance since the 0.2% increase in 2010,” noted the report. “And rents are likely to remain stuck in neutral during the early part of the year.”

However, Yardi Matrix points to ongoing household formation and a strong job market sustaining demand. Absorption totaled 285,000 units year to date through November, including in markets with high supply. Immigration, which rebounded in 2022 and is projected to remain consistent in coming years, also is providing a boost for demand.

The national occupancy rate remained flat at 94.8%. Rates were either down or unchanged year over year as of November in all but five markets. Chicago and Seattle were up 0.2% year over year, followed by Denver, Washington, D.C., and the Twin Cities at 0.1%. Atlanta had the largest decline, down 1.3%.

Metros in the Northeast and Midwest continue to see the highest rent growth, with New York City topping the list at 5.9% year over year, followed by New Jersey at 4.2%; Columbus, Ohio, at 3.8%; Kansas City, Missouri, at 3.3%; and Chicago at 3.1%.

However, Yardi Matrix data is seeing negative rent growth intensify in several metros, with five of its top 30 markets being down 3% or more year over year. Austin, Texas, saw the largest decline of 5.7%.

Rents are down month over month in both the renter-by-necessity and luxury lifestyle segments by 0.1% and 0.2%, respectively. Rent growth was negative in 22 of the top 30 metros in the lifestyle segment and 21 in the renter-by-necessity segment.

Nashville, Tennessee, and Orlando, Florida, saw the most significant declines in the segments. Nashville was down 0.9% in lifestyle and 1.2% in renter-by-necessity, while Orlando was down 0.9% in lifestyle and 1.2% in renter-by-necessity.

Several markets had month-over-month gains, led by Columbus at 0.5%, New York City at 0.4%; and Atlanta at 0.3%.

According to Yardi Matrix, renewal rent growth continues to moderate. Renewal rents rose 5.2% nationally year over year in October, down 80 basis points from September. Despite negative asking rent growth, Las Vegas experienced the highest renewal rent growth at 12.4%. The national lease renewal rate averaged 64.4% in October, settling between 64.4% and 66% for the past six months. Renewal rates were highest in New Jersey and lowest in Los Angeles.

National asking rents for single-family rentals (SFRs) fell last month by $1 to $2,123. Year-over-year growth increased 20 basis points to 1.2%.

California’s Orange County and Kansas City saw the highest year-over-year growth, while Orlando, Seattle, and Austin came in at the bottom of the list.

“With some first-time home buyers priced out of the market by record-high home prices and lofty mortgage rates, demand for SFRs remains robust,” noted the report. “However, increased attention to the sector has brought with it legislative scrutiny via bills at the state and national level that aim to stop institutions from buying single-family rentals.”

These proposals include measures that would either ban or impose financial penalties on institutional owners, according to Yardi Matrix, saying the bills are counterproductive with institutions owning less than 1% of single-family homes and less than 5% of SFRs.

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