In July 2024, the national average rent rose for the sixth consecutive month, increasing by $4 to reach $1,743, according to Yardi Matrix’s latest National Multifamily Report. This marks a 0.8% year-over-year (YOY) growth, an uptick of 20 basis points. Although this YOY growth is modest by historical standards, recent trends indicate the potential for improved performance shortly.
Regional Dynamics and Market Insights
The report highlights a rent rebound in several Sun Belt markets, which is a positive sign for future performance. This region has faced dampened rent growth over the past few months due to a significant pipeline of new units. However, the recent increase in rents suggests that the market may be adjusting to this influx.
Rent growth is currently highest in gateway markets in the East and secondary markets in the Midwest. New York City leads with a YOY growth of 5.2%, followed closely by Washington, D.C., at 4.0%. Other notable performers include Kansas City, Missouri, and Columbus, Ohio, with stable growth rates of 3.4% and 2.9%, respectively.
Despite these positive signs, the national occupancy rate held steady at 94.6% for the seventh straight month in June, representing a slight decline of 0.4% YOY. This indicates that while rents are rising, occupancy levels have not significantly improved.
Market Recovery in High-Supply Areas
Several metros that experienced negative growth due to high new supply are now showing signs of recovery. For instance, Austin, Texas, saw its rents improve from -6.5% YOY in June to -5.7% YOY in July, despite a 6.0% increase in apartment supply over the last year. Similarly, Dallas experienced a slight improvement from -2.0% to -1.5% YOY, while Charlotte, North Carolina, and Raleigh, North Carolina, also showed positive trends.
Phoenix followed this pattern, with its YOY rent growth improving from -2.8% in June to -2.6% in July. Yardi Matrix anticipates high delivery volumes will persist for the next 15 to 18 months, which may continue to influence rent growth dynamics in these markets.
In the short term, Washington, D.C., and New York City remain leaders in rent growth, with increases of 0.9% and 0.7% respectively from June to July. Dallas and Austin are tied for third place with a 0.6% increase.
Single-Family Rent Trends
Single-family rents continue to rise, with an increase of $5 in July to $2,171. However, YOY single-family rent growth fell by 10 basis points to 1%. Additionally, single-family occupancy rates decreased slightly by 10 basis points in June, reaching 95.3%.
Economic Context and Future Outlook
The steady demand for multifamily housing is underpinned by robust economic performance. The U.S. gross domestic product increased by 2.8% in the second quarter, and 1.3 million new jobs were added in the first half of the year. This strong economic backdrop supports stable multifamily demand.
Moreover, inflation is receding, increasing the likelihood of Federal Reserve rate cuts in the near future. Since 2022, rates have been raised to combat inflation, but the easing of inflationary pressures may lead to a more favorable borrowing environment.
“There are signs the economy will cool, but the worst-case scenario is likely to be a soft landing rather than a hard recession,” the report noted.
Summary
In July 2024, the national average rent continued its upward trajectory, reaching $1,743. While YOY growth remains modest, recent trends indicate potential for future improvement, particularly in Sun Belt markets. Gateway markets in the East and secondary markets in the Midwest are leading rent growth, with New York City and Washington, D.C., showing the highest increases. Despite high new supply dampening growth in some metros, recovery signs are evident. Economic indicators remain strong, supporting multifamily demand, and the possibility of Federal Reserve rate cuts may further enhance market conditions. Investors should monitor these trends to identify opportunities in this evolving landscape.
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