Strong job market uplifts multifamily sector's prospects
The multifamily housing market concluded 2023 with a notable slowdown, marking the fifth consecutive month of declining rents, as reported in the latest Yardi Matrix National Multifamily Report.
This trend led to a decrease of $17 in the average asking rent over the last five months, settling at $1,709 by December’s end. Excluding the minimal gain in 2020 due to the pandemic, the full-year rent growth for 2023 was 0.3%, the lowest since the 0.2% increase in 2010.
The report anticipates rents will remain relatively flat in early 2024. While regions in the Northeast and Midwest led in rent growth, five of the top 30 metros analyzed by Yardi Matrix exhibited year-over-year rent reductions exceeding 3%. Despite these reductions, occupancy rates have risen in five markets.
“While it is prudent to prepare for downside scenarios, conditions may not be as weak as they appear on the surface,” Yardi said in the report. “Maybe most importantly, household formation and the strong job market should continue to maintain demand.”
Throughout 2023, the sector absorbed 285,000 units through November, even in high-supply markets. Demand has been further bolstered by a rebound in immigration during 2022, with expectations of continued consistency in the coming years.
Interestingly, the single-family rental segment exhibited stronger performance than multifamily housing. In this segment, rents increased by 1.2% year-over-year through December, reaching $2,123, with occupancy rates slightly rising to 95.8% in November.
Read more: US job growth exceeds expectations
“It is increasingly appearing as though the job market will hold up better than consensus expectations in the wake of the Federal Reserve’s rate hikes,” the report noted. “Almost two years with a sub-4.0% unemployment rate has kept household balance sheets in good shape, boosting consumer confidence and helping to maintain spending. While GDP growth will likely slow in 2024, the chances of a hard landing are dimming.”
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