That’s Two Months of Positive Multifamily Rent Growth

Article originally posted on Globe St. on March 10, 2023

But, Year Over Year, Rent Growth Continues to Fall.

One question facing the multifamily sector amidst inflation and the Federal Reserve’s push on interest rate increases and quantitative tightening has been where would rents, and therefore NOI and valuations, go. According to new data from CoStar Group’s Apartments.com, the answer is into the slow lane, at least for now.

“Nationally, sequential monthly rents rose $2.50 or 0.15% in February, marking the second month of positive rent growth after a negative streak from August to December of 2022,” Jay Lybik, National Director of Multifamily Analytics at CoStar Group, said in prepared remarks. “However, national year over year rent growth continues to decline with supply additions outstripping mediocre demand, causing instability across the rental market. If we’re able to record a few more months of positive monthly rent growth, year over year rent growth could reverse course, bringing supply and demand closer to equilibrium.”

As the country has seen recently, trying to monitor economic conditions month by month is an exercise in futility and confusion. There is almost constant jitter from small changes and it’s the long-term trends that are important.

Annual rent growth is still positive but has slipped from 3.2% in January to 2.9% in February. Out of the 40 largest metro markets, only Baltimore and Philadelphia saw an improvement to the tune of 10 to 20 basis points. As the analysis said, it represents “a small reversal in the overall weakening rent growth picture.” Emphasis on the miniscule.

A number of Midwest metros, including Indianapolis at the top, are on the market rent growth list, which is an interesting development given the demographic shifts to the south and west. Part of the reason might be that there has been less construction of additional units to put downward pressure on rents.

“The majority of Sunbelt markets have witnessed significant pullback in rents over the past year, except for Miami and Orlando which have defied the odds and remain amongst the top rent growth leaders,” the firm wrote. “Las Vegas and Phoenix have seen a dramatic slowing of growth, rounding out the bottom of the annual rent growth ranking in February. Both markets watched year over year asking rents go from the low 20% range in Q4 2021 to negative. Additionally, Atlanta and Austin have experienced significant deceleration over the past 12 months, going from 18% year over year to barely positive in February.”