What Multifamily Rent Growth Patterns Will Look Like This Year

In 2023, national average asking rents increased by 1.6% in the multifamily rental market, according to a report from Yardi Matrix. The rent growth story is expected to be different this year, with Yardi Matrix forecasting two main shifts in this market. First, record available supply is expected to depress rent appreciation in many of the markets that saw growth during the pandemic. This could result in a handful of markets ending the year with negative growth. Yet, absorption has been robust and is expected to continue. However, it may take a year or more for this new supply to be fully absorbed.

The second factor of the year for this sector is the continued decrease in the spread between in-place rents and asking rents. Asking rents are typically a leading indicator of in-place rents. Currently, most markets still have a large gap between the two. Yet, that gap is expected to continue to shrink as asking rent increases remain stifled.

For the most part, the multifamily rental market is stabilizing. The large increases in asking rents that occurred in 2021 and 2022 have been vanquished with a modest growth of 0.8% in asking rents is expected across most markets in 2024. Finally, once the historically large amount of supply in the market is absorbed, a return to the usual 3-4% yearly growth in asking rents is anticipated.

It should also be noted that regional patterns will likely remain. Last year, for example, different regions and markets had a variety of experiences, Yardi Matrix noted.

In Western and Southwestern areas, which experienced a surge because of the pandemic, multifamily rents had the worst performance in 2023. Negative growth was reported in the following areas: Las Vegas at -2.5%, Boise at -2.4%, Phoenix at -2.2%, Austin at -1.6%, and Reno at -1.2%.

In contrast, medium-size cities in the Midwest, South, and Northeast anchored by large universities tended to perform the best. For example, Lafayette came in at 11.6%, Madison at 9.5%, Knoxville at 8.9%, and Syracuse at 8.1%.

In numerous markets most of the growth occurred during the first half of the year. Month-over-month growth peaked in April, fell off significantly in July, and dipped into negative territory by September.