Monthly Rents Decline for Third Month in a Row, New Deliveries Dramatically Outpace Demand
WASHINGTON, November 04, 2022--(BUSINESS WIRE)--Today, Apartments.com – a CoStar Group company – published an in-depth report of multifamily rent growth trends for October 2022 backed by analyst observations. Month over month rent decline hit a three-month streak with October’s numbers in the books, alongside continued evidence the once fastest growing markets have lost momentum and new markets are coming into play.
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Year Over Year Rent Growth, by Market (Graphic: Business Wire)
"Since August, sequential monthly rent growth has started tracking downward, but we’re witnessing that decline accelerate – rents decreased by $9 or 0.6% in October compared to just 0.3% 30 days prior," said Jay Lybik, National Director of Multifamily Analytics at CoStar Group. "These rent conditions reflect a rough start to the already typically slow fourth quarter as new deliveries continue to drastically outpace demand."
YEAR OVER YEAR REMAINS POSITIVE, DECELERATION PICKS UP SPEED
While sequential monthly rents decreased, year over year rents remained in the green. However, the pace of deceleration continues to pick up momentum as October asking rents fell to 4.8% from 5.7% at the end of September. Additionally, none of the top 40 largest markets saw their year over year asking rent expand in the month of October, which further illustrates the overall disappointment in market conditions.
MIDWEST MARKETS SURGE AHEAD, PALM BEACH AND LAS VEGAS AMONG SUNBELT PULLBACKS
Throughout 2021 and most of this year, the fastest growing markets dotted the Sunbelt. Now, only two markets in that region hold the top rent growth spots and five out of ten markets sit squarely in the Midwest and Gateway locations. Markets with the fastest growing rents are now witnessing the quickest drawback.
Palm Beach, in particular, has seen a dramatic slowing of growth with year over year asking rents decreasing from 30.6% in Q4 2021 to 3.8% at the end of October. Las Vegas isn’t far behind with year over year asking rents down to 1.5% in October compared to 22.0% at the beginning of 2022. Tampa and Phoenix are also among the markets that witnessed rents retreating by over double digits so far this year.
MONTH OVER MONTH PAINTS STARK PICTURE, FORMER HIGH FLYING SUNBELT MARKETS OCCUPY BOTTOM TEN
The true nature of the deteriorating rent situation can be understood when looking at sequential rents month over month. Only three out of the 40 largest markets saw month over month rents holding positive or at zero. In absolute terms, San Jose rents declined the most in the last 30 days, down 1.3% or $45.
Additionally, the reversal of fortune for Sunbelt markets is illustrated clearly in the month over month rent growth chart. Half of the bottom ten markets are occupied by former Sunbelt high growth markets such as Orlando, Nashville and Austin, among others.
When analyzing only year over year rent growth data, it gives the impression the multifamily market continues to perform meaningfully above historical averages and will provide property-level operations with solid revenue growth for 2022. However, digging deeper highlights the reality of retreating rents across major markets. Furthermore, with most markets already unstable given the tumultuous economic climate, 2023 poses significantly more downside risks for multifamily and the over-supplied Sunbelt specifically.
About CoStar Group, Inc.
CoStar Group, Inc. (NASDAQ: CSGP) is a leading provider of online real estate marketplaces, information and analytics. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. STR provides premium data benchmarking, analytics and marketplace insights for the global hospitality industry. Ten-X provides a leading platform for conducting commercial real estate online auctions and negotiated bids. LoopNet is the most heavily trafficked commercial real estate marketplace online. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Homesnap is an industry-leading online and mobile software platform that provides user-friendly applications to optimize residential real estate agent workflow and reinforce the agent-client relationship. Homes.com offers real estate professionals advertising and marketing services for residential properties. Realla is the UK’s most comprehensive commercial property digital marketplace. BureauxLocaux is one of the largest specialized property portals for buying and leasing commercial real estate in France. CoStar Group’s websites attract tens of millions of unique monthly visitors. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S., Europe, Canada and Asia. From time to time, we plan to utilize our corporate website, http://www.costargroup.com, as a channel of distribution for material company information. For more information, visit www.costargroup.com.
Apartments.com is the leading online apartment listing website, offering renters access to information on more than 1,000,000 available units for rent. Powered by CoStar, the Apartments.com network of sites includes Apartments.com, ApartmentFinder.com, ApartmentHomeLiving.com, Apartamentos.com, WestsideRentals.com, ForRent.com, ForRentUniversity.com, After55.com and CorporateHousing.com.
Apartments.com is supported by the industry's largest professional research team, which has visited and photographed over 500,000 properties nationwide. The team makes over one million calls each month to apartment owners and property managers, collecting and verifying current availabilities, rental rates, pet policies, fees, leasing incentives, concessions, and more. Apartments.com offers more rental listings than any other apartments website, and innovative features including a drawing tool that allows users to define their own search areas on a map, and a "Travel Time" feature that lets users search for rentals in proximity to a specific address. Apartments.com creates easy access to its listings through a responsive website and iOS and Android apps, and provides unmatched exposure for its advertisers through an intuitive name, strategic search engine placements and innovative emerging media.
The Apartments.com network reaches millions of renters nationwide, driving both qualified traffic and highly engaged renters to leasing offices.
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