Climbing multifamily rents have made headlines for more than a year, but those days might be coming to an end.

New data from Cortland Chief Economist Brad Dillman suggests rents have already peaked for 2022, predicting prices in 700 U.S. markets will slow down through the rest of this year and into 2023, settling into an annual increase that will average only slightly higher than previous years. In an interview with Multifamily Dive, Dillman said he expected rent growth to hit 9.5% and inflation to rise to 8% this year.

Dillman said much of the upward pressure on rents has come from new renters with sizable big city salaries flocking to states like Florida and markets like Boise, Idaho, from large urban areas. That's a situation that is unlikely to last as employers begin tempering wages to match their employees' home cities.

"We can see how people are taking an income that was generated somewhere else, like in New York or California, and deploying that income in places like Florida. That is affecting rents and having secondary effects socially in markets," Dillman told Multifamily Dive.

"We can see this trend in the data. We have people state their incomes when they're going to sign a lease. There are places in Florida that are seeing income growth of 50%."

Rising rents have seen investors flock to multifamily assets. Even if rent growth begins to slow, Dillman said the asset class isn't risky right now, with a well-publicized undersupply justifying lower cap rate and lower yields.

"By my estimate, we need to build at least an entire metropolitan area [of housing units] before we right-size our housing market," he said. "Now, at the same time, I have no doubt that you definitely do have some people who are starting to do deals because they need to get deals done. But whether or not that's actually going to be problematic for them may end up being a different question depending on the course of rent growth and policy actions."

Dillman expects interest rates will "take a little bit of steam out of the market," he said, and he predicts an increase in payroll expenses.

"In general terms, if you're hitting peak rent growth now, you can expect peak payroll expense growth several quarters out from now and that will affect some of these valuation dynamics," he said.