Year-over-year multifamily rent growth dropped to 7%, the lowest level in 17 months, according to a new report from Yardi Matrix.
Yardi Matrix’s latest National Multifamily Report found that asking rents fell $9 during November to $1,719. All of Yardi Matrix’s top 30 metros continue to display positive rent growth year-over-year according to the report, though more recent performance shows some weakness. Almost two-thirds of the top 30 had negative growth over the last three months and more than 90% had negative growth over the last month.
The report also found that the single-family rental market is following the same pattern, with the average asking rent dropping by $5 to $2,091, and the YoY increase fell by 80 basis points to 5.9%. Despite the deceleration, 10 metros led by Sacramento and Washington, D.C., recorded asking rate gains of at least 10% during the month.
- The decline in rents was concentrated in the high-end Lifestyle segment, which recorded a drop of 0.8%. Renter-by-Necessity rents fell by 0.2%..
- Indianapolis took over the top spot, with asking rent rising by $4 to $1,224, a 11.4% increase YoY. Indianapolis, still among the least expensive of the major metros, is one of a handful where rents have continued to increase.
- New York (0.4%) and Indianapolis (0.3%) were the only two metros to record a monthly gain in asking rents in November.
- Meanwhile, 26 metros recorded monthly declines, the lowest being Boston (-1.3%), Las Vegas (-1.2%), Austin (-0.8%), Atlanta and Denver (both -0.9%) are among the high in-migration markets that are starting to show signs of weakness due to a combination of slowing demand and rapid supply growth.
- National renewal rents continue to show strength, increasing 11.1% year-over-year through September, up slightly from August, as property owners were still in the process of bringing rents of existing tenants closer to asking rates. However, as asking rates for new tenants have turned negative, the growth in renewal rents will certainly slow in coming months, as well.
- Renewal rents remain highest in Miami (20.5%), Tampa (19.3%), Raleigh (18.0%) and Orlando (16.2%), markets in which asking rents rose dramatically over the last two years but now are decelerating.
- National lease renewals were 63.8% in September, and they continue to drop from the peak of 68.2% in the fourth quarter of 2021.
- Metros with the highest lease renewal rates include Philadelphia (76.3%), Kansas City (69.7%), Miami (66.5%) and Indianapolis (64.7%), while San Francisco (47.3%) and San Jose (49.3%) are among the lowest.
“With the economy softening, demand for units slowing and rising interest rates creating headwinds for housing, multifamily asking rent growth finally took a turn downward in November,” said the author of the report. “The deterioration in rents was not unexpected nor is it necessarily a sign of a deep recession. Rent increases have far exceeded normal growth patterns for nearly two years.”
“The weakening of demand can be seen in declining occupancy rates,” added the author. “Nationally, the average occupancy rate for stabilized properties was 95.6% in October, down 60 basis points YoY. However, the occupancy rate has fallen by 1% or more over the last year in nearly half of the top 30 metros, with the biggest declines in Las Vegas (-2.5% to 93.6%), Tampa (-1.9% to 94.8%) and Phoenix (-1.9% to 94.1%).”
For the full report, click here.