Yardi Matrix has downwardly revised its forecasts for national multifamily rent growth, although the commercial real estate data firm by and large maintains a rosy outlook in regard to sector fundamentals.

The company now expects rent growth of 2.9% by the end of the year, down from 3.2% growth in its previous multifamily forecast in June. Next year’s rent growth outlook has been downgraded as well, sliding from 3.5% in the prior forecast to 2.8%. Yardi projects rents to pick up after the conclusion of a recession, with average increases in asking rents of 3.5% to 4% for a few years starting in 2025.

The downgrades reflect Yardi’s expectation of a minor recession in 2024 as more consumers begin to feel the impacts of Federal Reserve rate increases. Additionally, rents are expected to step back in many Southern markets for the rest of this year. In fact, some markets across the country that are replete with supply, including Austin; Boise, Idaho; and the southwest Florida coast, may be headed for rent decreases by the end of 2023. Yardi, however, expects the magnitude of any negative rent growth to be allayed by the challenging financing environment, which will likely stall some future expected deliveries and hinder further supply additions.

Despite the anticipated slowdowns, Yardi remains fairly optimistic in its near- to medium-term perspective. As of August, 16 of the key markets tracked by Yardi had asking rents that have declined since the beginning of 2023. Only nine of these 16 — urban and suburban Atlanta; Austin; Boise; Orlando; Phoenix; Portland, Oregon; San Antonio; and southwest Florida — saw negative month-over-month growth in August. Meanwhile, three of the 16 — metro Los Angeles; the east San Francisco Bay area; and Wilmington, Delaware — actually saw rents increase by more than 50 basis points month over month.

Many of these 16 markets are grappling with the aforementioned problem of too much supply, but an inventory glut doesn’t necessarily signal market weakness, according to Yardi. Rather, these areas are simply “catching up in their efforts to meet the unexpected surge in demand brought during the pandemic, and operators are competing with each other to fill new units by trying to offer comparatively more attractive prices,” wrote Yardi senior research analyst Andrew Semmes.