U.S. asking rents increased $3 in October to $1,727, annual growth falls dramatically
SANTA BARBARA, Calif., Nov. 16, 2022 – Average multifamily asking rents showed a slight increase in October, despite weaker demand and dipping year-over-year (YOY) growth, according to the latest Yardi® Matrix National Multifamily Report.
U.S. asking rents increased $3 in October to $1,727. Year-over-year growth fell to 8.2 percent, the lowest level since the summer of 2021 and down from its 15.3 percent peak in the first quarter.
The single-family rental market is also cooling from record-level performance. The average U.S. asking rent was unchanged at $2,088 in October, while the YOY increase fell by 160 basis points to 6.6 percent.
The deceleration in asking rents is gradual, as all of the Matrix top 30 metros produced YOY rent increases. Experts are concerned about how the multifamily market will react to the rapid increase in short-term interest rates as the Federal Reserve attempts to reduce inflation.
“The inevitable economic slowdown raises questions about when the impact will start to be felt and how much the sector will be affected,” states the report. “Demand has weakened since the first quarter due to slowing job growth and concerns over the macroeconomic environment. The robust household formation that drove demand in 2021 is no longer in effect.”
The U.S. rental occupancy rate has dropped 50 basis points over the past year, but the national 95.5 percent rate remains above the long-term average.
With debt costs higher and still rising, property sales and new construction have begun to slow. However, with home mortgage rates up to 7.3 percent as of early November, first-time homebuyers are being frozen out of the market, according to the National Association of Realtors, and will be more likely to remain in rentals.
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