National Multifamily Report – October 2022

Year-over-year rent growth fell to 8.2 percent, the lowest level since the summer of 2021, according to Yardi Matrix.

The national multifamily market posted slowing performance demand, which kept rent growth on a decelerating trend, according to Yardi Matrix’s latest survey of 140 markets. The average U.S. asking rent marked a small increase over the previous month, but year-over-year growth fell 130 basis points to 8.2 percent in October, a $3 increase to $1,727. The occupancy rate declined 50 basis points over the past year, to 95.5 percent, which is still above the long-term average. The single-family rental market is also slowing down from its recent remarkable run, with the asking rent unchanged at $2,088 in October, but an annual increase lower by 160 basis points to 6.6 percent.

The multifamily industry’s slowdown is gradual. All of Matrix’s top 30 markets posted year-over-year rent increases—above the 5 percent mark in 25 of them, and five with double-digit increases—Indianapolis (11.8 percent), Orlando (11.6 percent), Miami (11.4 percent), San Jose (10.6 percent) and Dallas (10.5 percent). However, the Federal Reserve’s rapid growth in interest rates—at 4 percent following the latest increase—dampens demand, property sales and new construction—despite the housing shortage, banks will likely cut back on financing construction projects that have not yet broken ground. Furthermore, Fed Chair Jerome Powell forecasted that interest rates will keep rising. Slowing job growth paired with macroeconomic challenges added to the faltering demand, and with home mortgage rates up to 7.3 percent in November, prospective homebuyers are forced to remain in rentals, according to the National Association of Realtors. Occupancy has fallen by at least 1 percent year-over-year in the Inland Empire (-1.0 percent), Tampa and Atlanta (-1.1 percent), Sacramento (-1.3 percent) and Phoenix and Las Vegas (-1.8 percent), and by at least 0.5 percent in 19 of Yardi Matrix’s top 30 metros.

Numbers reflecting the monthly performance show that rent growth was sustained by the Renter-by-Necessity segment, up by 40 basis points in October. Lifestyle rents remained flat. Leading markets were New York (0.8 percent), Indianapolis (0.7 percent), Kansas City (0.6 percent) and Portland (0.5 percent). In all these metros, supply is below the national average. Negative growth was recorded in the Lifestyle category in 16 of the top 30 metros, led by Las Vegas (-0.8 percent), Sacramento (-0.6 percent) and the Inland Empire (-0.5 percent). Only four metros posted contractions in the average RBN rent.

National lease renewals continued to decline, from the 68 percent peak in the fourth quarter of 2021 to 60.2 percent in September, pointing to weakening demand and lower affordability levels. The highest lease renewal rates in September were registered in Philadelphia (73.8 percent), Kansas City (67.9 percent) and Baltimore (66.9 percent), and the lowest in Los Angeles (41.6 percent), San Francisco (43.1 percent), San Jose (43.9 percent) and Seattle (50.2 percent). National renewal rents increased by 10.9 percent on an annual basis in September, which is a 10-basis-point decline from August.

Rising interest rates have dramatically changed the multifamily market: demand weakened, rent growth softened, transaction activity is dwindling and new construction dependent on financing is likely to decline. Despite the ominous forecast, investors can still have leverage—originating debt, lending construction loans, and mezzanine debt and preferred equity.

The average asking rent in the SFR segment rose 6.6 percent year-over-year in October, a 120-basis-point decrease from September. The rate remained flat at $2,088. The occupancy rate declined 1.3 percent year-over-year in September but remained strong at 96.1 percent. Increasing mortgage rates are impacting the SFR market as reflected by the number of first-time buyers, which has already fallen to 26 percent of all sales in the year ending in June, the lowest number ever in a survey conducted by the National Association of Realtors. Those unable to afford to purchase will likely rent apartments or single-family homes.


Read the full Yardi Matrix report.

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