After a 5-month-long stagnation, multifamily rents rose slightly by $3 in March to $1,706, according to a new report from Yardi Matrix.
Yardi Matrix’s National Multifamily Report for March found that year-over-year growth fell to 4% nationally, 90 basis points less than February and the lowest level since rents started an unprecedented climb in April 2021. The national occupancy rate declined by 10 basis points to 95.1%, due to a decline by that amount in Renter-by-Necessity occupancy rates, which fell to 95.2% in February.
As for the single-family rental market, rental rates increased in March by $5 to $2,079, while the year-over-year increase fell by 80 basis points to 2.8%. Occupancy rates decreased in February by 10 basis points, but remain strong at 95.5%.
Key highlights:
- Metros in the Midwest and Northeast remain atop the Matrix top 30 metro rankings, led by Indianapolis (8.6%), New York and Kansas City (6.9%), Boston (5.8%) and Chicago (5.2%). New apartment deliveries totaled only 1.6% of stock as of March.
- Asking rent growth nationally turned positive last month after four months in which rents dropped overall. Monthly gains were led by Acela Corridor metros: Boston (1.0%), Washington, D.C. (0.8%), New York (0.6%) and Baltimore (0.5%) were all in the top five, along with Indianapolis (0.8%), which continues to show strength.
- The biggest change was in the Lifestyle segment, in which most metros posted negative growth a month ago. Nineteen of the top 30 metros recorded increases in March, while only 10 saw monthly decreases.
- In the RBN segment, 21 metros recorded monthly increases, while only eight saw decreases. Over the last three months, Seattle’s RBN rents have increased by 0.3%, while Lifestyle rents have dropped (-0.7%).
- The bifurcation between Lifestyle and RBN remains high in Seattle, a sign that high costs are focusing demand on lower-price units. RBN asking rents increased 1.3%, while Lifestyle rents dropped (-0.3%).
- Renewal rent growth nationally increased by 30 basis points to 9.3% year-over-year through January. Renewal rent growth for in-place tenants had been gradually waning since peaking at 11% in the fall, and is soon expected to drop closer to the levels of asking rent growth, which is at 4%.
- National lease renewal rates were 63.9% in January, down from 65.2% in December. Renewal rates have been very consistent over the past year, both nationally and on a metro level.
Major takeaway:
“The first quarter produced no gains for multifamily rents for the first time in a decade, but the results come as somewhat of a relief,” said the author of the 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.”
Added the author, “With affordability a growing concern and consumers constrained by high inflation, it is likely that rent growth in 2023 will be modest. Yet a multifamily hard landing is not yet in the cards, since household formation is still boosted by the tight job market, high single-family home prices and mortgage rates are keeping homeownership out of reach for some renters, and consumer balance sheets remain strong (for now). The big question continues to be how the economy will react to sharp interest rate increases.”
For the full report, click here.
