Apartment performance was solid in June, contributing to a moderately positive first half of 2024 that Yardi Matrix described as “encouraging” given present market conditions.
Average advertised asking rents nationwide grew to $1,739 in June, up a steady but unexceptional 0.6% year over year. Those yearly gains have been receding since March, when that figure peaked this year at 0.9%. Advertised rents were up 1.5% nationally in the first half of this year compared to the second half of 2023 and 1.0% quarter over quarter. For context, rent growth averaged 2.5% in the first half and 1.7% in the second quarter in the five years immediately before the pandemic took hold; in 2021 and 2022, when multifamily performance was thriving post-pandemic, advertised rents were up 6.1% in the first half and 3.9% in the second quarter.
While current figures are certainly modest compared to some recent trends, Yardi still labeled the first half of the year “a win” considering the difficult market environment. While demand has weakened considerably from 2021, when there were more than 600,000 units absorbed, Yardi reported that absorption is on track for more than 300,000 units this year — a figure Yardi called “a healthy amount.” Demand remains viable, buttressed by the ongoing shortage of for-sale inventory, a strong labor market and stout foreign immigration. But absorption continues to suffer from an active construction pipeline flooding the market with product, with Yardi projecting 560,000 deliveries this year.
Expenses, meanwhile, have now risen at an above-trend level for two years, with expenses per multifamily unit climbing annually nationwide by 8.0% in 2023 after increasing by 8.2% the year prior, according to Yardi’s data. That’s more than double the 3.4% average growth rate of the previous four years. Expense growth last year was fueled by a 29% annual hike in the costs of property insurance. The increases have put many property owners in a precarious position during a time when rent (and income) growth is slowing. Yardi expects advertised asking rent growth to remain weak through the rest of the year, especially in markets with large delivery pipelines and dropping occupancy rates like Austin, Charlotte, Nashville, Orlando and Phoenix.
