According to Yardi Matrix's latest National Multifamily Report, in November 2024, the national average multifamily rent dropped by $5 to $1,744. This decline reflects the ongoing wave of new supply counteracting robust demand, particularly in Sun Belt markets. As developers deliver an influx of units to meet past demand surges, the multifamily market continues to adjust to these dynamics.
Year-over-year (YOY) rent growth remained subdued, slipping by 10 basis points in November to a modest 0.9%. Notably, this growth rate has hovered at or below 1.0% throughout the year, signaling a cooling period for multifamily rent increases. While these figures indicate overall stability, the underlying trends vary widely across markets, underscoring the importance of local context for investors.
Rent Trends Across Key Metros
Among the top 30 metropolitan areas tracked by Yardi, rent growth has presented a mixed picture. Sixteen markets recorded positive YOY rent growth, led by New York City at an impressive 5.0%. On the other hand, 14 markets posted negative YOY growth, with Austin, Texas, experiencing the sharpest decline at -5.6%.
Despite being the leader in YOY rent growth, New York City saw a slight dip compared to October, slipping by 0.3 percentage points. Similarly, other top-performing metros, including Kansas City, Missouri (3.4%), and Detroit (3.2%), also posted slight declines from the previous month. In contrast, Baltimore recorded an increase in YOY growth, rising from 2.1% in October to 2.4% in November. This nuanced performance highlights how local economic conditions, supply pipelines, and demographic trends are shaping rental markets differently across the country.
The national occupancy rate for multifamily properties remained steady at 94.7% in October, unchanged from the same period last year. This stability suggests that, while rents may be softening, demand for rental housing continues to hold strong in most markets.
Month-to-Month Movements
On a month-to-month basis, rents fell in 25 of the top 30 metros. Denver recorded the most significant drop at -1.0%, reflecting a market under pressure from a high volume of deliveries. Meanwhile, Kansas City, Missouri, saw no change, and a handful of metros posted slight increases. Notably, rents rose by 0.1% in Baltimore, 0.2% in Miami and New York City, and a striking 1.0% in Tampa, Florida.
Tampa’s performance stands out as an anomaly. Over the past year, rents in this market have generally declined due to a surge in new deliveries. However, November’s growth reflects temporary demand from homeowners displaced by Hurricane Milton. These individuals have turned to the rental market for short-term housing solutions, providing a boost to local multifamily operators.
Single-Family Rentals and Broader Market Dynamics
Single-family rentals followed a similar trajectory, with the average rent falling by $7 from October to November, reaching $2,150. This marks a $25 decrease from the summer peak. Yardi attributes this slowdown to typical seasonal patterns and competition from new multifamily deliveries, particularly in states like Florida and Texas. Investors in the single-family sector should note that, while rents are softening, demand fundamentals remain strong, especially in suburban areas.
Operational Implications for Multifamily Operators
The moderation in rent growth emphasizes the importance of controlling operating expenses for multifamily investors and operators. According to Yardi’s report, expense growth has slowed significantly in recent years. Costs have risen by 4.0% year-to-date, a marked improvement compared to the 9.0% growth in 2023 and 7.1% in 2022. Key contributors to this deceleration include stabilizing insurance costs and reduced labor and maintenance expenses.
However, risks remain. The report cautions that potential policy changes under the incoming Trump administration could reignite cost pressures. Specifically, the possibility of increased tariffs or stricter immigration policies could disrupt supply chains, drive up labor costs, and delay housing development projects. These factors could also dampen rental demand, as stricter deportation policies might affect tenant populations in certain markets.
Strategic Considerations for Investors
For real estate investors, the current environment underscores the need for a disciplined approach. While rent growth has slowed, opportunities remain in markets where demand outpaces supply or where economic fundamentals support long-term stability. Sun Belt markets, despite facing near-term headwinds from new deliveries, continue to attract population growth and business investment, suggesting strong recovery potential over time.
Additionally, the stabilization of expense growth offers a silver lining for operators. By implementing efficient property management strategies and leveraging technology to optimize operations, investors can preserve margins even in a low-rent-growth environment. Diversification across markets and asset classes can further mitigate risks associated with regional economic fluctuations or policy changes.
The multifamily market is navigating a transitional phase marked by softening rents and steady occupancy rates. While new supply is exerting downward pressure on rents, demand fundamentals remain robust, particularly in key metros. For investors, this period presents an opportunity to refine operational strategies, capitalize on emerging market trends, and position portfolios for long-term growth. Understanding the nuances of local markets and staying attuned to broader economic and policy developments will be critical to success in the months ahead.
Comments