Multifamily rents continued to increase through the first half of 2023, despite challenges for the sector and continuing economic uncertainty. But job growth has remained robust and new households keep forming, creating apartment demand and ongoing rent growth.
“We anticipate that rents will continue to increase modestly over the course of the year as demand has firmed, albeit at a more moderate rate in line with historic growth levels,” say Yardi Matrix experts in a newly released U.S. Multifamily Outlook.
Through the first five months of 2023, U.S. asking rents rose $17, or 0.9%, with year-over-year growth falling to 2.6%.
“We expect continued deceleration, with rent growth of 2.5% for the full year,” states the outlook. The average U.S. apartment rent reached an all-time high of $1,716 in May.
Challenges for the sector include slowing demand, growing issues with affordability, slower population growth and competition from a large number of new units coming online through 2024.
The capital side of the industry has suffered due to heightened interest rates, which show little sign of decreasing in the near-term. Property values are down 15-20% from their peak and are still declining due to the higher cost of capital.
New deliveries will be high at least through the end of 2024, as the 1 million units under construction come online. New starts are now declining, however, because debt is more expensive and fewer banks are financing construction.
Household formation, which drove the 22% cumulative growth in U.S. asking rents over 2021 and 2022, has slowed but remains positive. Although some pandemic demographic trends are moderating, the desire for more space to balance living, working and family appears to have staying power and should continue to drive demand.
Demand is also boosted by the sharp drop in home sales, which keeps renters in apartments. High mortgage rates also create an affordability hurdle for first-time buyers and middle-income families looking to trade up.
Home mortgage rates rose to 6.5% in March 2023, up 230 basis points from March 2022, increasing monthly mortgage costs by 29% and overall ownership costs by 20%, according to the Harvard Joint Center of Housing Studies.
Related Stories
Apartments | Jun 25, 2024
10 hardest places to find an apartment in 2024
The challenge of finding an available rental continues to increase for Americans nation-wide. On average, there are eight prospective tenants vying for the same vacant apartment.
MFPRO+ News | Jun 24, 2024
‘Yes in God’s Backyard’ movement could create more affordable housing
The so-called “Yes in God’s Backyard” (YIGBY) movement, where houses of worship convert their properties to housing, could help alleviate the serious housing crisis affecting many communities around the country.
Multifamily Housing | Jun 17, 2024
Elevating multifamily properties through quiet luxury
As the demands of urban living continue to evolve, the need for a tranquil and refined home environment has never been more pronounced.
Multifamily Housing | Jun 14, 2024
AEC inspections are the key to financially viable office to residential adaptive reuse projects
About a year ago our industry was abuzz with an idea that seemed like a one-shot miracle cure for both the shockingly high rate of office vacancies and the worsening housing shortage. The seemingly simple idea of converting empty office buildings to multifamily residential seemed like an easy and elegant solution. However, in the intervening months we’ve seen only a handful of these conversions, despite near universal enthusiasm for the concept.
Adaptive Reuse | Jun 13, 2024
4 ways to transform old buildings into modern assets
As cities grow, their office inventories remain largely stagnant. Yet despite changes to the market—including the impact of hybrid work—opportunities still exist. Enter: “Midlife Metamorphosis.”
MFPRO+ News | Jun 11, 2024
Rents rise in multifamily housing for May 2024
Multifamily rents rose for the fourth month in a row, according to the May 2024 National Multifamily Report. Up 0.6% year-over-year, the average U.S. asking rent increased by $6 in May, up to $1,733.
Apartments | Jun 4, 2024
Apartment sizes on the rise after decade-long shrinking trend
The average size of new apartments in the U.S. saw substantial growth in 2023, bouncing back to 916 sf after a steep decline the previous year. That is according to a recent RentCafe market insight report released this month.
MFPRO+ News | Jun 3, 2024
New York’s office to residential conversion program draws interest from 64 owners
New York City’s Office Conversion Accelerator Program has been contacted by the owners of 64 commercial buildings interested in converting their properties to residential use.
MFPRO+ New Projects | May 29, 2024
Two San Francisco multifamily high rises install onsite water recycling systems
Two high-rise apartment buildings in San Francisco have installed onsite water recycling systems that will reuse a total of 3.9 million gallons of wastewater annually. The recycled water will be used for toilet flushing, cooling towers, and landscape irrigation to significantly reduce water usage in both buildings.
MFPRO+ News | May 28, 2024
ENERGY STAR NextGen Certification for New Homes and Apartments launched
The U.S. Environmental Protection Agency recently launched ENERGY STAR NextGen Certified Homes and Apartments, a voluntary certification program for new residential buildings. The program will increase national energy and emissions savings by accelerating the building industry’s adoption of advanced, energy-efficient technologies, according to an EPA news release.
