Apartment Rents Move Up in Seasonal Pattern

In a sign of some normalcy coming back to the multifamily market, rents were up 0.6% in March. It’s the second monthly increase after six months of drops, according to Apartment List. The national median rent is now $1,388.

However, the graph of apartment rates from mid-2022 when they first started to slide after the pandemic highs shows a still downward moving trendline. As the firm noted, “for the last two years seasonal declines have been steeper than usual and seasonal increases have been milder.” Year-over-year rent growth has been negative since last summer. It’s currently at -0.8%. “In other words, as the market has cooled, apartments are on average slightly cheaper today than they were one year ago. But despite this cooldown, the national median rent is still more than $200 per month higher than it was just a few years ago.”

Out of the largest 100 metropolitan areas, 81 saw rent increases. “But on a year-over-year basis, rent growth is positive for only 42 of these cities,” they wrote. “Many of the steepest year-over-year declines remain concentrated in Sun Belt cities that are rapidly expanding their multifamily inventory, such as Austin (-7.1 percent year-over-year), Atlanta (-5.3 percent), and Nashville (-4.8 percent).”

Currently, national vacancy is at 6.7%, the result of two years of easing after “historic tightening in 2021.” Apartment List noted that a lot of newly constructed units will come onto the market in the coming year. RealPage projects that unit deliveries will top last year’s — itself a record — by 50%. That would seem to have the potential of prolonging a downward trend of rents.

But trying to discuss this as a national trend is misleading as the distribution of new units has followed ongoing demographic shifts in the country. New construction has been strongest in the Sun Belt and that is where the most options will be available. Additionally, the downward pressure on rents is likely to be on the most expensive apartments. During the pandemic, costs to build shot up. To make deals work, developers needed to get high rents, so there was a lot of focus on luxury apartments. The opening of supply was therefore on the top.

Apartment List also said that falling apartment prices are finally starting to show up in the Consumer Price Index. “But as we had long been predicting, the shelter component of CPI finally turned the corner last spring and has been steadily cooling off ever since,” they wrote.

Multifamily Spring:

Multifamily Spring is coming to New York City this April 18. This year’s program will bring together the industry’s most influential and knowledgeable real estate executives from the multifamily sector for 5 hours of face-to-face networking and over 5.5 hours of can’t miss sessions. Learn more or register here.