Renting an apartment unit keeps getting more expensive, good news for multifamily owners, not so great for tenants.
The latest National Multifamily Report from Yardi® Matrix shows that U.S. monthly apartment rents rose again in May, the third straight month in which these rents inched up.
According to Yardi Matrix’s report, the average U.S. asking rent rose $7 in May to $1,716. But apartment rents on average are less expensive this year than last. Average rents were up 2.6% since May of last year.
Renters looking for some relief can take solace in the fact that this May’s year-over-year rent growth was the lowest since March of 2021.
For the year to date, average U.S. asking rents are up $18, or 1% since January 1. The seasonal outline of rent growth is not much different from what the multifamily industry would see during a typical pre-pandemic year, although the rate of rent increases is lower.
“While performance displays resilience, the data is not unambiguously positive as it has been for most of the last two years,” states the Yardi Matrix report. “Rent growth has turned negative year-over-year in several metros as occupancy rates weaken amid slackening demand and rapid growth in new deliveries.”
Overall market attitudes remain positive, Yardi Matrix researchers say. Renting is still cheaper than owning, and first-time buyers are renting longer. The stickiness of high-income renters likely contributes to the recent resurgence in high-end Lifestyle properties, in which rents rose 0.4% in May.
The average single-family unit rent reached $2,100 for the first time in May, about a year after topping the $2,000 mark, Yardi Matrix reported.
Rent growth continues to be led by metro areas in the Midwest and Northeast: Indianapolis (7% year-over-year increase), Kansas City (6%), New York (6%), Boston (4.8%) and Chicago (4.6%). Chicago led the country in May with a 1% increase in average asking rent when compared to April.
Meanwhile, year-over-year growth has turned negative in eight metros, and more could follow in the coming months as rent increases decelerate from record-high growth during the past two years.
Apartment vacancy rates remain low, too. Yardi Matrix reported that the national occupancy rate remained at 95% in April. That doesn’t mean, though, that apartment owners aren’t seeing more vacancies. Yardi Matrix says that on a year-over-year basis, occupancy rates fell in all but one of the company’s top-30 markets, New York City.
And are apartment owners keeping their tenants when their leases end? Not always. Yardi Matrix reported that 61.8% of renters with leases expiring in March renewed. That is down from 64.9% in February. Yardi Matrix says that these renewal rates are feeling pressure from the higher number of new apartment building deliveries in many markets. This gives renters more choices if they are considering moving from their current unit.
