This article was posted on Sunday, Jan 01, 2023
Rent growth

Asking rents are falling in many national multifamily markets, bringing an end to 18 months of record-breaking rent growth, according to a special bulletin from Yardi Matrix.

The rent growth coming to an end and the decline in rent growth has been steadily expanding in multiple multifamily markets.

“Of the 136 multifamily markets that Yardi Matrix forecasts, 56 had month-over-month declines in asking rents in September, compared to 53 markets with declining rents in August and 18 markets with declining rents in July,” Yardi Matrix writes in the report. “Of the Yardi Top 30, 22 markets saw asking rents fall month-over-month in September, versus 21 markets in August and seven in July.”

Multifamily Rent Forecast Update

“After approximately 18 straight months of record-breaking rent increases in nearly all markets, national rent growth has ground to a halt,” writes Andrew Semmes, senior research analyst, in the report.

“As usual, most of the volatility is being driven by lifestyle buildings, where asking rents are down an average of 0.15 percent month-over-month across all 136 markets we forecast, and down an average of 0.41 percent month-over-month in the Yardi Top 30,” the report says.

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The combination of recession concerns, requests to return to the office, rents that are just too high, and a multi-decade high of new rental supply are all combining to cause apartment rents to soften and potentially decline, writes John Burns Real Estate Consulting.

In a report by Alex Thomas and Jesse McConnico called “Apartment Rents Don’t Grow to the Sky” they write, “Rents are set to fall in many areas around the country, which is exactly what the Fed needs to help get inflation under control. This short-term pain for rental investors should be offset by the long-term gain of a stable economy and lower borrowing rates.

“Every quarter, we summarize the earnings calls of six publicly traded apartment REITs (Real Estate Investment Trusts) for our research clients, and our consultants have been busier than ever helping apartment and build-to-rent developers understand local market dynamics as they build and lease new communities,” they write in the report and in a recent email newsletter.

Why Rents Soared

Rents soared for a couple of reasons, the report says.

It was the combination of record demand due to working from home and relocations, plus capital flowing into apartment construction resulting in a 36-year high of multifamily starts and a 34-year high of multifamily completions. Even with the level of construction it was still not enough to meet demand.

Chart courtesy of John Burns Real Estate Consulting

More Than Just Regular Seasonal Decline

The report says while we are not in a recession, the chances for one are increasing in the next year. “Our forecasts for the end of 2022 and for 2023 have broadly been revised downward, as the usual seasonal deceleration has been exacerbated by a more uncertain economic horizon in the medium term.

“Moving into 2023, we do not expect to see rents accelerate again nearly as much as they did in the first half of 2021 and 2022, but inflationary pressures remain high and employment gains are still very strong, so there is potential for a stronger-than-average jump out of the gate in the spring,” the Yardi report says. “However, eventually the Fed’s actions will noticeably cause inflation to fall and unemployment to rise, and when that happens rent growth will largely become anemic. Until the Fed’s policy moves work their way through the economy, though, we should expect a period of increased volatility,” Semmes writes.


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