January’s rent figures encourage hope of ‘soft landing’ in multifamily

Apartment rent prices were flat between December and January, Yardi Matrix reported — a positive signal considering recent declines in demand within the multifamily housing sector.

Nationwide asking rents averaged $1,701 in the opening month of 2023, unchanged from December to halt a two-month streak of month-over-month declines. On a year-over-year basis, however, rents continued to slide, with January’s decline at -5.5%, down 70 basis points from the month prior.

With the U.S. economy still uneven, household formation slowing and the banner growth of the past two years proving unsustainable, experts continue to ponder how much demand will fall by and how much rents will be impacted. But January’s signals were encouraging, with overall rent growth holding steady in most of the top 30 apartment hubs tracked by Yardi.

Indianapolis continued to lead the pack in year-over-year rent gains by a wide margin at 10.5%. It was followed by Kansas City (8.3%), San Jose (8.1%) and Miami (7.5%). Some markets where rents tracked above norm in 2022 (such as Miami; Tampa; Nashville; and Orange County, California) have fallen back in line with historic averages. Beyond that, however, growth remains steady even as it decelerates.

Demand indicators are staying healthy as well, with 269,000 apartment units absorbed nationally in 2022. At least 10,000 units were absorbed in several metros, including Dallas, Houston, Austin, Atlanta, Chicago, Miami, Los Angeles and Washington, D.C.

Several potential impediments to renter demand remain, including the lingering problem of inflation. If the encouraging January rent figures prove transitory, waning demand could dovetail with other concerns within the apartment industry, including increasing expenses for property owners.

Such expenses, including property taxes, insurance and renovations related to climate change, have property owners and landlords concerned. Joanna Zabriskie, CEO of BH Companies, called 2023 “the year of expense control” due to spiraling costs.

All of this, in turn, could combine with high financing costs to give investors pause and hinder transaction volume. Early-year returns point to a soft landing for the apartment segment, but with so many fundamentals in flux at present, multifamily is an interesting sector to watch as 2023 unfolds.


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