December marked the fifth consecutive month of rent declines, with the average U.S. asking rent dropping another $4 to $1,709, according to Yardi Matrix’s latest survey of 140 markets. Year-over-year rent growth stood at 0.3 percent in December, the weakest rent performance since 2010, excluding the 2020 pandemic year. Meanwhile, absorption in the multifamily market totaled 285,000 units in 2023 through November—in line with recent years, when rents appreciated considerably—and occupancy remained unchanged at 94.8 percent. SFRs outperformed multifamily in 2023, with rents down $1 to $2,123 in December, for a 1.2 percent year-over-year increase.
Even though the overall national rent trended down for most of the second half of the year, the ongoing household formation and strong job market maintained demand for multifamily apartments. Absorption was healthy nationwide, including in markets with strong supply expansion and negative rent growth, such as Austin, Orlando, Phoenix, Dallas and Nashville. Demand was also sustained by an increase in net immigration, up by more than 1 million annually in the last two years and projected to remain at that level in the coming years.
Rent growth remained highest in the Northeast and Midwest, led by New York City (5.9 percent year-over-year), New Jersey (4.2 percent), Columbus (3.8 percent), Kansas City (3.3 percent) and Chicago (3.1 percent). Austin posted the weakest rent performance (down 5.7 percent), and another four of Yardi Matrix’s top 30 markets recorded rent declines of 3.0 percent or more.
Rents fall across property segments
Rents contracted across asset classes, down 0.1 percent month-over-month in the Renter-by-Necessity segment and by 0.2 percent in the upscale Lifestyle segment. More so, rent growth was negative in 22 of the top 30 metros in Lifestyle and 21 in the RBN segment. The most significant declines in both segments were registered in Nashville (down 0.9 percent in Lifestyle and 1.2 percent in RBN) and Orlando (down 0.9 percent in both Lifestyle and RBN). High supply volumes continued to impact rent and occupancy, with examples including Austin, Miami, Charlotte and other Sun Belt markets.
Renewal rent growth softened further, up 5.2 percent nationally year-over-year in October, down 80 basis points from September. Las Vegas led in renewal rent growth (12.4 percent) despite negative asking rent growth, but the metro posted weak supply growth. The lowest renewal rent growth rates and negative asking rent growth were registered in Phoenix (1.0 percent renewal rate) and Austin (2.9 percent), both metros with robust delivery pipelines.
The U.S. multifamily market has ahead a new year riddled with ongoing uncertainty regarding expense growth, rent growth, pipeline underway and construction starts, as well as interest rates. While no deep concerns are forecasted for 2024, these trends will shape the industry.
Rent growth remained steady in the single-family rental segment, up 1.2 percent year-over-year in December, the equivalent of a $1 drop to $2,123. Occupancy rose 10 basis points in the 12 months ending in November to a solid 95.8 percent. These metrics reflect strong demand for SFRs, but increased attention to the sector also translated into some legislative scrutiny via bills at the state and national levels that aim to deter institutions from buying single-family rentals.
Read the full Yardi Matrix multifamily real estate report.
