With the economy softening, demand for units slowing and rising interest rates creating headwinds for housing, multifamily asking rent growth finally took a turn downward in November. Facing a variety of economic headwinds and deteriorating demand, multifamily rents finally starts to normalize after far exceeding normal growth patterns for nearly two years.
Average asking rents increased by 22% nationally between January 2021 and October 2022, a rate that would be unsustainable under optimal conditions. Now, however, the decades-high inflation rate has left household balance sheets in a weaker position than a year ago, while economic growth is slowing as the Federal Reserve raises interest rates. Asking rents fell $9 during the month to $1,719, while year-over-year growth dropped to 7.0%, the lowest level in 17 months .
The decline in rents was concentrated in the high-end Lifestyle segment, which recorded a drop of 0.8%. Renter-by-Necessity rents fell by 0.2% in November. After several months of deceleration, the expected pullback in rents started in November. The 0.5% decline is the biggest monthly drop in rents since the global financial crisis. Some of the weakness can be attributed to normal seasonal factors, since rents tend to flatten in the winter, when fewer people move. However, the market clearly is feeling the effects of high inflation that has caused consumer sentiment to drop and led to less demand for housing.
