Yardi Matrix: Multifamily Asking Rents Increase for Sixth Consecutive Month

Article originally posted on HERE on August 2, 2024

Economic growth and demographics continued to bolster multifamily rents at the start of the third quarter. The average U.S. asking rent increased $4 to $1,743 in July, while year-over-year growth rose 20 basis points to 0.8%, according to the latest Yardi Matrix National Multifamily Report.

While Yardi Matrix said multifamily rent growth is weak nationally compared with historic levels, July was a month of “encouraging signs,” which included a rebound in growth in some Sun Belt markets that have struggled due to an influx of new supply. However, it noted that the future is not as certain with the high levels of new deliveries over the next year to year and a half.

“First and foremost, demand has not faltered, boosted by the strong economy. U.S. GDP grew by 2.8% in the second quarter, while the economy added 1.3 million jobs in the first half of 2024. There are signs the economy will cool, but the worst-case scenario is likely to be a soft landing rather than a hard recession,” stated the report. “Inflation is receding as well, giving rise to hope for interest rate relief for the industry.”

Year-over-year rent growth was again highest in the Northeast and Midwest. New York City continued to lead the way at 5.2% growth year over year, followed by Washington, D.C., at 4%; Kansas City, Missouri, at 3.4%; and Columbus, Ohio, and New Jersey at 2.9%.

However, the Sun Belt metros with an influx of supply experienced negative year-over-year rent growth. Austin, Texas, which has added 6% to its multifamily stock over the past year, saw -5.7% year-over-year rent growth for July, followed by Atlanta at -3.3% and Raleigh, North Carolina, at -2.8%.

In June, the national occupancy rate remained at 94.6%, where it has been since the start of the year. This is down 0.4% year over year. Las Vegas, at 93.6%, and the Twin Cities, at 95%, were the only metros to see a year-over-year increases. The biggest occupancy drops were in Indianapolis, Houston, Dallas, and Kansas City, all down 0.8%.

Month over month, 15 metros posted rent gains. Rents were up 0.2% in the renter-by-necessity segment and 0.1% in the luxury lifestyle segment. Washington, D.C., led the month-over-month gains with 0.9%, followed by New York at 0.7% and Dallas and Austin at 0.6%. Yardi Matrix noted that several metros doing well on a year-over-year basis saw month-over-month rents decrease in July, with this trend being seen in Columbus, Boston, and Chicago. The reverse also is being seen in metros that have experienced declining annual rent growth over the past two years; Austin, North Carolina’s Raleigh, and Phoenix all saw month-over-month increases in last month.

On the single-family rental (SFR) side, asking rents increased $5 in July to $2,171, with year-over-year growth dropping 10 basis points to 1%.

“SFR overall performance continues to be strong as rents rose again in July and occupancy remains high,” noted the report. “Demand, driven in part by the high cost of homeownership and the lack of available homes for sale, shows no sign of abating. However, markets with high levels of new supply are beginning to feel pressure on rents.”