National Multifamily Report – August 2023

Year-over-year multifamily rent growth, all asset classes. Chart courtesy of Yardi Matrix

The multifamily real estate industry maintained a healthy performance in August, with the average U.S. asking rent up $1 to $1,728, a 1.5 percent year-over-year increase and 20 basis points below the July rate, according to the latest Yardi Matrix survey of 140 metros. Rent growth marked a 420-basis-point decline since the beginning of the year, tightly tied to supply expansion on a metro level. Occupancy in the sector remained at 95 percent for the past four months. Meanwhile, single-family rents rose 0.5 percent year-over-year to $2,104, signaling deceleration in the high-end segment.

Strong economic growth sustained demand, with the employment market adding 3.1 million jobs in the 12 months ending in August when the unemployment rate clocked in at 3.8 percent. Despite the economy holding up, headwinds do exist, including rising property expenses—such as insurance (up 18.8 percent year-over-year in June), repairs and maintenance (14.4 percent), administrative (11.8 percent) and utilities and payroll (both 7.8 percent)—and inflation, which even though is decreasing, remains high. Moreover, the interest rate—at 5.25 percent to 5.5 percent—is prone to further increases by year’s end.

Through July, some 190,000 multifamily units were absorbed in the U.S.—while this volume is far behind the 600,000-unit pace of 2021, it is healthy by historical standards. Washington, D.C., Phoenix, Miami, Chicago and Denver led in absorption in absolute numbers in 2023, while as a percentage of stock, Charlotte, Tampa and Nashville were in the lead.

Rent growth was highest in the Northeast and Midwest—New York City (5.7 percent year-over-year), New Jersey (5.4 percent), Chicago (4.9 percent), Indianapolis (4.8 percent) and Boston (4.6 percent). New York (98 percent) and New Jersey (97.3 percent) had the highest occupancy rates and relatively scarce levels of completions. Occupancy declined year-over-year in all but three of Yardi Matrix’s top 30 markets: Chicago (up 0.3 percent), and New York and Denver (flat). The largest occupancy declines were recorded in Austin, Detroit and Atlanta, all down 130 basis points.

On a monthly basis, rents inched up 0.1 percent in August, sustained by the Renter-by-Necessity segment (up 0.1 percent), while Lifestyle rents contracted 0.1 percent. Overall asking rent growth increased the most in Kansas City (0.9 percent), Boston, Los Angeles and New York (all 0.6 percent) and New Jersey (0.5 percent). Of Yardi Matrix’s top 30 metros, RBN rents rose in 16, and Lifestyle rents in 13. Competition within the luxury segment is higher as most deliveries are Lifestyle units. The largest month-over-month declines occurred in Columbus and Nashville (-1.0 percent in each). Kansas City posted the largest month-over-month gain in the Lifestyle segment, up 1.1 percent.

Renewal rent growth stood at 7.8 percent year-over-year in June, down 40 basis points from May. The rate has been on a downward trend since the 11.1 percent peak registered in the fourth quarter of 2022. Renewal rent growth in the double digits occurred only in Miami (12.4 percent), New York City (10.6 percent) and Orlando (10.4 percent), and the slowest growth rate was recorded in San Francisco (1.8 percent). Meanwhile, national lease renewal rates softened to 62.9 percent in June, affected by the new supply.

Asking rates for single-family rentals dropped $6 in August to $2,104, up 0.5 percent year-over-year and 70 basis points below the July rate, while occupancy slid 10 basis points to 95.7 percent in July. The softening is visible at the high end of the sector, both in the rent and occupancy metrics: Lifestyle rent growth turned negative, down 0.4 percent year-over-year in August, and occupancy declined 100 basis points to 95.3 percent. Meanwhile, RBN rents rose 2.9 percent and occupancy in the segment increased 290 basis points to 97.7 percent. These numbers reflect the dwindling affordability as prices rise.

Read the full Yardi Matrix report.