Multifamily Rent Growth to Remain Scant: Yardi Matrix
Multifamily performance remains robust, but it is not without hurdles. Demand remains steady given a strong jobs market, but some fundamental metrics including rent growth and occupancy have eroded since the market peak in 2022 and further erosion in the second half of this year is expected, according to the 2024 Multifamily Outlook from Yardi Matrix.
Multifamily rents are up 1.1% year to date, with monthly increases of about 0.6%. Analysts predict that rent growth will be around 1.7% for the calendar year, significantly lower than the 24% increase observed in 2021 and 2022.
The performance within regions differs. A solid job market and growth in the economy are driving consistent rent increase in the Midwest and Northeast, but an inflow of new supply is putting rents under pressure in the Sun Belt.
Incoming supply is projected to have an ongoing influence on rents across the country. Up to 553,000 of the 1.2 million units currently under construction are expected to be ready by the end of 2024.
“Supply growth has climbed in recent years due to strong demand for units, rapid rent growth and an influx of development capital,” said Matrix analysts. “Between 2021 and 2023, 1.3 million units came online, while in the first half of the 2010s only 858,000 units were delivered.”
Meanwhile, transaction activity remains lackluster amid higher-for-longer rates, according to Yardi, and sellers waiting for rates to fall have been hesitant to transact. However, there is enough “dry powder” available for purchase when prices fall to levels that allow investors to meet yield targets.
“Debt continues to be a sticking point. Agencies are active, debt funds have increased market share and CMBS is rebounding, but many banks are sidelined,” the report added. “Loans are being extended rather than refinanced, as borrowers and banks try to avoid foreclosures. Well-capitalized sponsors can withstand stress, but distress is rising among value-add properties that were financed with short-term debt shortly before rates rose.”