With 540,000 new apartments due to be delivered in 2024, Yardi expects rental price growth to be soft in some markets.
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Yardi Matrix expects weak rental growth throughout 2024 as multifamily rental prices were flat in January.
Average rent in the multifamily sector was $1,710, unchanged from last month and up just 0.5% year over year as new supply kept prices in check, according to Yardi Matrix National Multifamily Report for January.
Approximately 500,000 new multifamily rental units will be added in 2023 as projects started during the pandemic are completed, with the trend expected to peak in 2024. Yardi said 540,000 units are expected to come online this year, pushing down rental growth.
However, new supply is expected to decrease after this year as high interest rates and construction costs have led to a decline in multifamily housing starts in recent years.
Yadi Matrix
The report noted that expected new supply is far from evenly distributed. More apartments are expected to appear in high-growth South, West and Sun Belt tier 3 cities such as Huntsville, Ala.; Port St. Lucie, Fla.; Colorado Springs; Boise; Denver; Phoenix; and Nasdaq. Huvier is expected to add a large number of new apartments. Cities in the Northeast and Midwest are expected to see few new rents and therefore see the highest rent increases, with rents rising 5.5% annually in New York City and 4.4% annually in New Jersey.
Still, strong demand for rental housing nationwide is keeping multifamily rents from falling significantly, with more Americans renting for longer. Still cheaper than buying a house In all major U.S. markets. Strong job growth, a stable economy and continued immigration to major U.S. cities also keep rental demand high. The total number of immigrants in 2023 will be 3.3 million, according to a Congressional Budget Office report cited by Yardi.
The rental sectors that have been performing strongly are affordable housing and build-to-rent housing, the report said.
“While affordable housing and (single-family rental) starts in 2023 are down from the record numbers in 2022, construction in both areas is well above previous years,” the report states. “In 2023, Affordable housing starts totaled 67,000 units…more than three times the totals in 2013 and 2014. Likewise, starts in SFR communities with 50+ units hit 32,600 units in 2022, up ten percent from 2013 and 2014. times.”
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