According to Yardi Matrix, March did bring some rent growth in some markets, despite a slow first quarter.
The multifamily market held up well despite the Federal Reserve-induced economic slowdown, bank failures, and the deceleration of the last two years’ outsized rent increases.
“Rents and occupancy are stable as the market heads into the growth season,” writes Yardi Matrix in the report.
Highlights of the report
- Rents for multifamily properties rose slightly in March due to firm demand. As of March, the average asking rent in the U.S. was $1,706 per month, an increase of $3. Nationally, rent growth dropped 90 basis points from February to 4.0 percent, the lowest level since April 2021 when rents began an unprecedented rise.
- Even though two banks collapsed in 2023 (none did in 2022), multifamily property fundamentals remain strong. During the first quarter of 2023, both rents and occupancy rates were unchanged, and 21 of the top 30 Matrix metros posted rent gains.
- Rents for single-family homes increased by $5 in March to $2,079, while increases year-over-year fell by 80 basis points to 2.8 percent. The occupancy rate in February decreased by 10 basis points, but remains strong at 95.5 percent.
Keeping an eye on interest rates this year
As inflation continues to be an issue and interest rates continue to rise, “affordability (is) a growing concern” that the consumer may be “constrained by high inflation.”
It is likely that rents will grow modestly in 2023, according to Yardi Matrix. In spite of this, the tight labor market is still boosting household formation, preventing a multifamily hard landing.”
Additionally, high prices for single-family homes and higher mortgage rates prevent some renters from becoming homeowners. In the meantime, consumer balance sheets remain strong (for now). It remains to be seen how sharp interest rate increases will affect the economy.”
Lease renewals
A study by Yardi Matrix shows that many renters can afford increases at lease renewal time and that demand “isn’t declining as significantly as feared, and tenants looking to reduce their monthly charges have limited choices in many metro areas.”
Compared to December, 65.2 percent of leases were renewed in January, a decrease of 63.9 percent. Both nationally and regionally, renewal rates have been very consistent over the past year. That could change as a wave of supply comes online if absorption does not stay positive,” Yardi Matrix says in the report.
Read the full report here.
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