US Multifamily Fundamentals Remain Strong Despite Declining Rents

US apartment rents are on the decline, but experts say it’s nothing to be alarmed about.

condos, apartments

National rents dropped for the fourth month in a row in December by an average of $4 as the sector began to return to its normal levels of seasonal highs and lows. In its recent monthly report, Yardi Matrix said multifamily fundamentals remain healthy and apartment rents closed last year up 4% even though rent growth continues to decelerate.

“With the exception of the last two years, you’re seeing a return to seasonality. Rents would run up from March to December, drop off in the fall months, then ramp back up in spring,” Yardi VP Jeff Adler told Bisnow.

It's going to be a tough year for investors in high-end properties, Adler said. There is a wave of high-end supply expected to hit this year that will disturb absorption rates and raise vacancies in cities like San Francisco and New York, Adler said, and those headwinds could be exacerbated if the Fed quickens the pace for projected interest rate moves.

“On the other hand, if rents continue to grow, you make up that reduction in value. It’s really a question of how fast will interest rates go up; if this is a one-time adjustment it’s not that big of a headwind,” he said.

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