Multifamily Rents Inch Up Ahead of Spring

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Multifamily rents are creeping up as spring approaches, and many locations saw rents rise slightly in February, according to Yardi Matrix.

Metros in the Northeast and Midwest saw gains to counteract the rent declines in areas that saw strong new apartment inventory coming online.

Yardi Matrix says some of the Sun Belt metros have investors worried about the impact of new apartment unit deliveries.

Highlights of the Yardi Matrix February report

• Multifamily rents rose slightly in February, their first increase in seven months, in a sign that the market is stable. The average U.S. asking rent rose $1 during the month to $1,713, while year-over-year growth was unchanged at 0.6%.
• The Northeast and Midwest continue to outperform over the short term, led by New York City. At 5.4%, the Big Apple not only leads major metros in rent growth over the last year but at 0.6% also was the top performer during the month of February.
• Single-family rents slipped slightly, but fundamentals remain strong. Average single-family rents in the United States fell $2 in February to $2,133, while year-over-year growth fell 50 basis points to 1.2%. Rent growth was led by Boston, Raleigh and Orange County.

While rents are basically the same as they were about 18 months ago in most areas, “The stability on the surface belies a host of changing trends that are keys to determining the direction the market takes from here,” Yardi Matrix writes in the report.

Newly built apartments coming online are part of the story because, “Demand has remained healthy throughout the period that rents have been flat, as strong absorption was more than matched by an unusually high number of deliveries.”

Occupancy rates slide

“Occupancy rates will likely slide further, particularly in markets with large numbers of units under construction, as we forecast one million units to come online through the end of 2025,” the report says.

The report says the national occupancy rate was 94.5% in February, slightly down from the previous month and down 60 basis points year-over-year. Occupancy rates are either down or flat year-over-year in all but San Francisco (0.1%). Three Matrix top 30 markets are down by 1.0% or more: Atlanta (-1.2%), Indianapolis (-1.2%) and Austin (-1.0%).

Renewals slow further

Renewal rent growth is slowing, in line with the deceleration in asking rents. Renewal rents, the change for residents that are rolling over existing leases, fell 4.6% nationally year-over-year in January, down 20 basis points from December.

The national lease renewal rate averaged 64.8% in January. This is the first time that the national renewal rate has fallen below 65.0% since July 2021, as the range for the last six months has been between 65.4% and 66.8%.

Source: Rental Housing Journal