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Yardi Matrix is predicting weak rental growth throughout 2024 as multifamily rental prices stayed flat in January.
Rent prices in the multifamily sector were at an average of $1,710, unchanged from the previous month and up just 0.5 percent from a year ago as new supply dampened prices, according to Yardi Matrix national multifamily report for January.
Roughly 500,000 new multifamily rental units became available during 2023 as projects started during the pandemic were completed, a trend that is projected to peak during 2024. Another 540,000 units are projected to come online this year, keeping rent growth down, according to Yardi.
New supply is expected to drop off after this year, though, as multifamily starts have dropped in recent years amid high interest rates and construction costs.
Yardi Matrix
The expected new supply is far from evenly spread, the report notes. More apartments are expected in high-growth tertiary Southern, Western and Sun Belt cities, such as Huntsville, Alabama; Port St. Lucie, Florida; Colorado Springs; Boise; Denver; Phoenix and Nashville, which are all expected to add a bulk of the new apartments. Cities in the Northeast and Midwest are expected to add very few and, in turn, have seen the highest rent growth, with rents climbing 5.5 percent annually in New York City and 4.4 percent in New Jersey.
Keeping multifamily rents from dropping too far, though, is the strong demand for rental housing nationwide, with more Americans remaining renters for longer as renting remains cheaper than homeownership in all major U.S. markets. Strong job growth, a stable economy and continued immigration to major U.S. cities is keeping rental demand high as well. Immigration totaled 3.3 million during 2023, according to a Congressional Budget Office report cited by Yardi.
Rental sectors that have shown consistently strong results are affordable housing and build-to-rent housing, according to the report.
“Although both affordable housing and [single-family rental] starts fell somewhat in 2023 coming off record 2022 numbers, construction in both segments is well above previous years,” the report reads. “Affordable housing starts totaled 67,000 in 2023 … more than three times the totals in 2013 and 2014. Similarly, starts of SFR communities with 50-plus units reached 32,600 in 2022, a tenfold increase from 2013 and 2014.”
