National Multifamily Report – June 2023
Rent growth in June hit a 12-year low, according to Yardi Matrix’s latest report.
Year-over-year multifamily rent growth, all asset classes. Chart courtesy of Yardi Matrix
The U.S. multifamily average asking rent gained $7 in June, to $1,726, according to Yardi Matrix’s latest survey of 140 markets. The uptick is the equivalent of a 1.8 percent year-over-year rent growth, 74 basis points below the rate registered in May and 3.7 percent lower than the January rate. Although the market is displaying resilience, the rate is the lowest since 2011, excluding the pandemic year. Still, the average national rent increased by $20 (1.2 percent) in the second quarter and $23 (1.4 percent) during the first half of the year. Demand was sustained by the employment market—up by 1.5 million jobs during the first half of 2023—and weak home sales.
Occupancy rates stabilized at a healthy 95 percent. Single-family rentals had rents rise by $5 in June to $2,103, representing a 1.3 percent year-over-year increase, down 80 basis points from May. Yardi Matrix reshuffled the metros highlighted in this report: Columbus, Detroit, New Jersey (Central and Northern), Richmond and San Diego are in, while the Inland Empire, Kansas City, Orange County, Sacramento and San Jose were removed.
A growing number of metros posted negative performance in year-over-year rent growth, with nine of the top 30 metros in this position. Most of these were in the Sun Belt and West, areas where demand cooled as new projects are delivered. While some of the most pressing worries of the year appear unfounded—specifically those related to multifamily financing—the Federal Reserve signaled more hikes of the interest rates. The cost of debt increased significantly, which altered the multifamily mortgage market. Since the spring of 2022, policy rates increased by 5 percent. This has slashed transaction activity and reduced demand. More so, Fannie Mae and Freddie Mac won’t meet allocations, presently at $75 billion.
On an annual basis, Northeast and Midwest metros remained in the lead in rent growth: New Jersey (6.5 percent), New York (6.3 percent), Indianapolis (6.1 percent), Chicago (4.9 percent) and Boston (4.7 percent). New Jersey’s performance has been fueled by New Yorkers relocating to the suburbs. Occupancy stood at 95 percent for the fourth consecutive month in June and rose in just two markets—New York (0.1 percent) and Chicago (0.2 percent). The largest occupancy drop was in Richmond-Tidewater (-1.7 percent). On a monthly basis, U.S. rents increased by 0.4 percent in both the Lifestyle and Renter-by-Necessity segments. Rents increased in 25 of the top 30 Yardi Matrix metros in Lifestyle and 26 in RBN. Leading metros were New York (1.3 percent), Chicago (1.1 percent), Columbus (1.0 percent), Boston (0.9 percent) and San Diego (0.8 percent). The performance of Lifestyle rents surpassed that of RBN in several metros, which can be partly attributed to the deficiency of for-sale homes on the market.
National renewal rent growth rose 8.5 percent year-over-year in April, just slightly down from 8.6 percent in March. Miami (13.8 percent), Orlando (12.2 percent), Raleigh (11.1 percent) and Richmond (10.9 percent) led in renewal rent growth. The report’s author points out that renewal rents remained high in metros where the asking rent turned negative, serving as examples Seattle (10.6 percent) and Austin (10.1 percent). Meanwhile, national lease renewals continued to decline, up 64.4 percent in April from 65.9 percent in March. New Jersey’s 82.3 percent renewal rate was the highest, and, paired with occupancy above 97 percent, it signals the lack of available options.
The single-family rental market continued to grow boosted by high home mortgage rates. The average asking rent in the segment increased $5 to $2,103 in June, for a 1.3 percent year-over-year increase. Occupancy in June stood at 95.9 percent and marked a 30-basis-point decline from the same month a year ago. Affordability for first-time buyers dwindled significantly, with Optimal Blue’s 30-year FHA fixed-mortgage rate index at 6.6 percent in late June, about double the 2020-2021 levels. Furthermore, the difference between renting and owning has increased to more than $1,000 per month, according to John Burns Real Estate Consulting. The volume of homes for sale declined during the pandemic and remained low. According to Realtor.com, 582,000 homes were available for purchase in May.
Read the full Yardi Matrix report.
