Key Details:
- Yardi Matrix® released its moderated 2023 Multifamily Outlook with projections for this year’s rent growth, which it expects to return to historical averages.
- Pressure from inflation and interest rates, and an increase in rental inventory, will likely cut 2022’s rental growth in half.
Yardi Matrix® released its 2023 Multifamily Outlook with projections for this year’s rent growth. As economic pressures from inflation cut last year’s rent increase by half, rent growth is expected to slow this year to more predictable trendlines.
In 2022, rents in the U.S. increased by 6.4% after peaking near a record 16% in 2021—the highest rent increases seen in a century.
With a moderated outlook for 2023, Yardi Matrix® expects U.S. rent growth to drop closer to its historical average.
Rent growth hinges on interest rates, inflation, and rental inventory
Demand for rental units is declining thanks to less renter migration, a drop in new household formation, and persistent affordability challenges.
Those affordability challenges are due mainly to rising interest rates and the impact of inflation on everyday expenses.
All eyes are on interest rates and how quickly inflation recedes. Economic growth will likely wane in the second half as the impact of rapid rate hikes take effect. This year we foresee rent growth dropping in half to 3.1 percent as demand lessens and deliveries remain high.
Meanwhile, new rental units are becoming available nationwide. Yardi’s forecast calls for 440,000 new deliveries this year—a stock increase of 2.9%. Those deliveries will be concentrated in fast-growing housing markets like Dallas, Austin, Charlotte, Nashville, and Orlando.
That said, new construction starts are expected to decline this year due to climbing construction costs, a shortage of construction workers, and delays in planning and permits.
For more insights on the rental industry, read the full report by Yardi® Matrix.
Top takeaways for real estate agents
If many in your community are renting because they can’t currently afford to buy a home—thanks to inflation and higher mortgage rates—it can’t hurt to offer them some good news about the slowing of rent growth this year.
While you’re at it, you can encourage them to take advantage of any rent declines happening in your area to save more (or start saving) for a down payment on a home as mortgage rates ease and market insiders predict a correction in home prices.
Share any news or information that can help them financially, so they know where your top priorities lie.
When they’re ready to enter (or re-enter) the market, they might just return the favor.
