Demand in the resilient multifamily housing sector continues to defy the headwind of a looming economic downturn, with Yardi Matrix reporting that the average nationwide asking rent grew by $7 (0.4%) in May.

The increase brought asking rents to $1,716, up $18 (1%) since January. Annualized rent growth among major metro areas continues to be led by cities in the Midwest and Northeast, with Indianapolis (where rents are up 7% from May 2022) topping the list. Kansas City, Missouri, is next at 6%, followed by New York (6%), Boston (4.8%) and Chicago (4.6%).

Chicago and New York led all cities in monthly growth at 1% and 0.9%, respectively. West Coast cities San Jose (0.9%), Denver (0.8%) and Seattle (0.7%) joined them in the top five.

The national occupancy rate remains stout at 95%, with New York leading all major cities with a 98% occupancy rate.

Yardi’s apartment data, however, isn’t as rosy as it has been for much of the past few years. Cracks in multifamily momentum are beginning to show as rent increases are slowing on both a yearly and monthly basis. May’s annualized growth rate was down 70 basis points from April and down 300 basis points since the start of the year, while eight metros tracked by Yardi were posting negative rent growth. Las Vegas (down 2.8% from May 2022) and Phoenix (-2.6%) have been in the red for months, with Austin (-1%), Seattle (-0.9%), San Francisco (-0.4%), Atlanta (-0.4%), Sacramento (-0.4%) and Orange County, California (-0.2%) joining them in May.

The decreases in several of these cities can be chalked up in part to a regression to a pre-pandemic mean, but there are other factors at play, according to Yardi. For one thing, new deliveries pose a headwind in some areas as red-hot apartment demand in recent years led to a surge in construction. Yardi estimates approximately 1 million apartment units currently under construction, with nearly 900,000 units set for delivery by the end of 2024.

Combine the influx of new space with slowing household formation, corporate layoffs and lack of affordable units, and there may be broader drop-offs in rent gains on the horizon. Market tone remains positive, Yardi reported, but the multifamily realm may see its long-standing unshakable resilience heavily tested in the months ahead.