National Multifamily Report – January 2023

Year-over-year rent growth remained on a downward trend, up 5.5 percent in January, with the average U.S. rate remaining flat at $1,701, according to Yardi Matrix.

The new year started with encouraging signs for the national multifamily market according to Yardi Matrix’s latest survey of 140 markets. Multifamily rents remained flat in the middle of the typically slow wintertime, at $1,701 in January. Still, year-over-year growth continued to decline, at 5.5 percent, a 70-basis-point decrease from the previous month, which is not surprising, as the growth of the last two years would be impossible to sustain. Occupancy remained above the 95 percent mark. The single-family rental market held up well, too, posting a 4.2 percent year-over-year increase in rents, to $2,070, up $1 from the previous month.

The job market—which posted 517,000 new jobs in January, following nearly 5 million new jobs in 2022—points to healthy demand so far, alleviating some of the concerns for the multifamily industry. In addition, the unemployment rate stood at 3.4 percent and wage growth remained steady.

Again, Indianapolis remained in the lead for year-over-year rent growth in Yardi Matrix’s top 30 metros, up 10.5 percent, followed by San Jose (8.1 percent), Miami (7.5 percent) and Kansas City (8.3 percent). Outside the top 30, Albuquerque 10.2 percent), Northern New Jersey (7.9 percent), St. Louis (7.2 percent) and Salt Lake City (7 percent) posted good results. Absorption data shows that 269,000 apartments were absorbed in the U.S. in 2022, with at least 10,000 units absorbed in Dallas, Houston, Austin, Washington, D.C., Atlanta, Chicago, Miami and Los Angeles. On a percentage of stock basis, Nashville (5 percent), Austin (4.1 percent), the Twin Cities (3.3 percent), San Jose (3.1 percent) and Columbus (3 percent) led the way. Last year, more than 400,000 units were delivered, which led to a 90-basis-point decline in the occupancy rate, to 95.3 percent.

On a monthly basis, the average U.S. multifamily rent remained unchanged from December. By asset class, Renter-by-Necessity rents inched up 0.1 percent and stayed flat for Lifestyle units. Of Yardi Matrix’s top 30 metros, 14 saw rent gains and 16 posted rent declines. Boston (0.9 percent), Miami (0.6 percent), Chicago and New York (both 0.5 percent) led short-term rent growth, likely sustained by steady demand in large urban areas, which stemmed from a rebound in immigration and a return to the office trend. Las Vegas reported the largest monthly decline, down 0.5 percent, followed by Sacramento, Austin, San Jose and the Inland Empire (all -0.4 percent).

Renewal rents rose 10.2 percent year-over-year through November, 160 basis points below the October rate. Tampa (16.9 percent), Orlando (14.6 percent) and Charlotte (14.5 percent) led gains. Meanwhile, national lease renewal rates remained on a downward trend, rising 61.1 percent in November, 3.8 percent below the October rate and the lowest level since before the pandemic. This steady decline could point to a shift in tenant behavior—those facing increases and lower wage growth are starting to look for lower rents.

Although steady, the multifamily market is set to face additional challenges in 2023. The usual ones—housing demand and the impact of higher rates on mortgage refinancing—are joined by some less-visible expense issues that are also out of the control of property owners, such as property taxes, financing costs, insurance and renovations related to climate change. Particularly challenged are commercial properties in Florida, Texas and the Gulf Coast.

The average asking rent in the SFR segment increased 4.2 percent year-over-year in January, 80 basis points below the December rate. This is the equivalent of a $1 increase from December to $2,070. Occupancy stood at 95.9 percent in December, a 1.2 percent decline from a year ago. Overall, the SFR market shows signs of improvement following a slowdown in late 2022, that resulted from rising prices and higher mortgage rates. With home purchases low (the Federal Housing Administration’s mortgage cost index dropped to 5.9 percent in early February), SFR growth is fueled by build-to-rent communities. In 2022, 13,800 SFRs were delivered in communities of 50 units or more, according to Yardi Matrix’s SFR database.

Read the full Yardi Matrix report.

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