Multifamily rents fell 0.5% year over year in November, with pandemic-induced declines in gateway markets accelerating to hold back national rent growth, according to the November Multifamily National Report from Yardi Matrix.
November marked the sixth straight month of year-over-year rent decreases for the nation as a whole, but the rent growth variance from metro to metro was stark. As rents in sprawling urban hubs continue to fall, other cities are faring much better at weathering the COVID-19 crisis; more than 100 secondary and tertiary markets, per Yardi’s data, maintained better annual rent growth than the national average during 2020’s penultimate month.
The Midwest, in particular, is flexing some multifamily muscle, with several cities reporting stable rent growth in spite of the resurgent virus. During November, many of the region’s large secondary markets, including Detroit (4.3% annual rent growth), Indianapolis (3.9%) and Columbus (3.1%) posted annual rent increases over the 10-year average of 2.5%; Kansas City ended the month just a hair below at 2.4%.
Tertiary markets, too, in the Midwest did well, including South Bend, Indiana (3.9% annual rent growth); Toledo, Ohio (3.2%); and Dayton, Ohio (2.8%). In fact, every Midwest market tracked by Yardi logged positive yearly rent growth in November except for the Twin Cities (-0.5%) and Chicago (-3.4%), the region’s lone gateway city.
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The story is the same in other regions in the country. Among the 30 largest multifamily markets tracked by Yardi, the Inland Empire (6.6% annual rent growth), Sacramento (5.9%) and Phoenix (4.3%) topped November in yearly rent escalation. The three western markets continue to benefit from inbound migration from nearby gateways like San Francisco and Los Angeles, as renters in those cities take advantage of more relaxed work-from-home flexibilities and seek cheaper housing elsewhere.
Similarly, on the East Coast, Baltimore (3.3% annual rent growth) is enjoying a stable rent environment as a beneficiary of renters leaving New York and Washington, D.C. So too is Scranton/Wilkes-Barre, the Pennsylvania tertiary market that led all metros in the country with 9.7% annual rent growth in November.
On the flipside, every gateway market in the country logged a larger yearly rent decline in November than in October. Manhattan (-10.2%) saw the largest annual decrease in November, followed by San Francisco (-8.6%), Washington (-3.9%), Chicago, Boston (-3.3%) and Los Angeles (-2.9%).
With a vaccine on the way, the question then is, when will rents in the country’s primary markets hit bottom and rebound?
The answer hinges on demand, and according to Yardi, recovering that may not be as simple as waiting for an effective vaccine.
“The positive vaccine news bodes well for the gateway markets, but it will likely take more than a vaccine for residents to return,” Yardi’s report said.
“Many prior residents have adjusted to their lives in the suburbs or have moved to an entirely different market and will need major incentives to return.”
