Multifamily Rent Growth Trailing Seasonal Norms

RealPage’s rent growth monitoring shows the first quarter of 2024 to be well off the norm. U.S. effective asking rents — rents after concessions and costs to secure a lease — fell 0.1% from the last quarter of 2023.

The pre-pandemic norm was a 0.6% increase in a year’s first quarter, according to the firm’s data for the period from 2010 to 2019. “The pandemic triggered a time when seasonal trends disappeared, as rents surged,” they wrote. “More recently, however, we’ve seen a return to a more normal cadence.”

According to RealPage, the change is due to unit deliveries as the firm has previously documented. Last year saw record-breaking levels of multifamily delivery. This year is supposed to see volumes 50% over those.

“Back when apartment occupancy and rent growth were hitting record highs across the nation in 2021 and 2022, we saw a surge in multifamily permitting activity,” RealPage wrote earlier this year. “As a result, 2023 logged a big increase in deliveries, with nearly 440,000 apartment units completed throughout the year, a 36-year high for the market. For 2024, scheduled completions in the U.S. total another 670,000 or so apartments, which blows past that record volume by about 50%.”

What RealPage says now is that “apartment operators have been cautious, especially in markets most impacted by elevated construction activity.”

Separately, it also seems likely that basic economic forces are in play. Significantly increased supply is likely to depress pricing, not just from caution but to attract renters from other choices.

Among major markets that saw some of the largest drops in rent were Dallas (-1.7%), San Antonio (-1.7%), San Diego (-1.6%), Phoenix (-1.5%), Tampa (-1.5%), Charlotte (-1.4%), Fort Worth (-1.4%), and Oakland (-1.3%).

“Among major markets with 1st quarter rent positioning trailing pre-COVID trends most severely, four are Texas markets that have seen record supply volumes soar past solid apartment demand. Austin and Dallas in particular have both recorded nation-leading apartment demand in recent months, but the amount of new supply that has hit these markets has been astounding, far outpacing those numbers,” RealPage wrote.

The firm listed five metros with above average growth: Virginia Beach (0.4%); Washington, D.C. (0.3%); Greensboro/Winston-Salem (0.1%); New York (0.1%), and Las Vegas (0.1%).

“New York was the nation’s occupancy leader in 1st quarter, with a rate of 96.8%,” they wrote. “Virginia Beach was also ahead of national norms with a rate of 95%. Another commonality these two markets share is limited increases to existing stock in the past five years. The existing unit base inched up by 4.1% in Virginia Beach in that time frame, while New York – already the nation’s largest apartment market – saw an increase of 2.3%.”

And the markets with growth in line with their own Q1 norms were Detroit, Minneapolis, Indianapolis, and Columbus. “These metros typically see mild to moderate rent growth – and that continued in the early months of 2024.”