National Multifamily Report – September 2023

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

At the start of the season when typically rent growth flattens, the average U.S. multifamily rent posted a 0.8 percent year-over-year increase to $1,722, which equates to a 60-basis-point or $6 drop from the August rate, and 490 basis points below the rate recorded at the beginning of the year, according to Yardi Matrix’s latest survey of 140 markets. It also marks the lowest year-over-year growth rate since the pandemic recovery in early 2021, and the first time since the global financial crisis in 2009 when national rents decreased in September. Occupancy held steady at 95 percent. Meanwhile, single-family rents fell for the second consecutive month, down $4 to $2,104, a 0.4 percent year-over-year increase and 10 basis points below the previous month. Occupancy rates remained flat at 95.9 percent, signaling healthy demand.

The multifamily real estate market’s headwinds include the slowing economy, as some consumers are losing strength with their post-pandemic savings dwindling and others resume paying their student loans. Rising energy prices and high interest rates are also dampening growth. Even so, the multifamily real estate market performance remained bifurcated, with the Top 30 ranking dominated by metros in the Northeast and Midwest, while most of the 14 metros with negative year-over-year growth were in the Sunbelt and West. Although much of the negative growth was caused by substantial supply expansion, demand and absorption remained positive in almost every metro thanks to ongoing strong job growth and household formation.

Rent growth was highest in New York City (5.6 percent year-over-year), New Jersey (5.2 percent), Chicago (4.0 percent), Indianapolis (3.8 percent) and Kansas City (3.6 percent). In addition, the Northeastern markets posted low completions, which, coupled with steady demand, put pressure on occupancy: New York (98.1 percent) and New Jersey (97.4 percent). Occupancy rates declined year-over-year as of August in all but four of Yardi Matrix’s top 30 markets: Chicago (up 0.5 percent), Boston and Denver (0.1 percent) and New York (flat). In six of Matrix’s top 30 markets, the rate dropped by one percentage point or more, with the largest decline in Detroit (down 1.3 percent).

Short-term rent growth takes a hit

On a monthly basis, the average U.S. multifamily asking rent decreased 0.3 percent or $6 in September. Declines were recorded in both asset classes: Renter-by-Necessity (-0.2 percent) and Lifestyle (-0.5 percent). Rents increased in just six of the top 30 Matrix metros for RBN and in only five for Lifestyle. New Jersey led in monthly gains in overall asking rents, up 0.8 percent, followed by Miami (0.2 percent) and Twin Cities (0.1 percent). All other metros posted declines. The post-pandemic boom encouraged a surge in supply, and now rent growth is paying the price—with increased competition in the market, Lifestyle rents feel the brunt of the decline, with six metros marking declines of 1.0 percent or more in September, with Indianapolis (-2.5 percent) falling the most.

Renewal rent growth continued to decelerate, down to 6.4 percent year-over-year in August, from 7.0 percent in July. Since the 11.1 percent peak recorded in August 2022, renewal rents have gradually declined. The highest renewal rents were registered in Miami (10.3 percent), with Raleigh not far behind at 9.9 percent. Yet, renewal rents in most metros aligned to more normalized rates—20 of the top 30 Matrix markets saw growth between 5.2 percent and 8 percent year-over-year, while San Francisco posted the lowest rate a 3.3 percent. Austin’s 7.5 percent rate stands out despite its negative growth in asking rents. Meanwhile, national lease renewal rates clocked in at 60.4 percent in August, highest in New Jersey (80.7 percent), Philadelphia (76.2 percent) and Detroit (70.5 percent).

Asking rents for single-family rentals dropped another $4 in September, to $2,104, a 0.4 percent year-over-year increase. Occupancy remained flat at a strong 95.9 percent in August. Growth of the build-to-rent market is stalled by several factors including land and entitlement issues and the difficulty lining up financing from banks, which are tightening standards and demanding high amounts of equity from developers. In response to this, some SFR/BTE investors have begun buying land that is zoned for SFR or has approvals in place, but development is delayed by lack of means to get started.

Read the full Yardi Matrix multifamily real estate report.