Multifamily rents nationally rose to $1,706 in March, a 4.0% year-over-year appreciation and 90 bps below the February rate, the lowest level since April 2021, when rents began their record performance.
The collapse of several banks keeps the financial markets volatile but multifamily property fundamentals remain stable, with rents and occupancy flat during the first quarter.
Locally, vacancy remains low in Q1 2023. Johnson Perkins- Griffin reported that vacancy decreased to 2.66% (-38 basis points) while rents increased from $1,625 to $1,644 (+$19 or -1.17%). Anecdotally, six of the nine submarkets showed decreases in vacancies. We believe the decrease in vacancy rate over the last quarter is largely due to the continued affordability gap, given the still over-inflated residential housing market. As housing affordability issues intensify, it will likely moderate further rent growth. East Sparks remains the highest rental submarket with rents averaging $1,840 followed by the midtown with average rents averaging $1,789 respectively.
To the point, Fannie Mae reports: Urban and suburban submarkets experienced significant shifts in fundamental demand and performance in the wake of the pandemic in 2020, with the effects lasting longer in some metros and submarkets than in others. Urban submarkets needed significantly more time to see a rebound, while suburban submarkets experienced unprecedented demand.
Additionally, while the divergence of the trends in vacancy rates and asking rents ended during 2021, shifts to suburban submarkets have caused rents in suburban markets to expand tremendously. Although we expect the multifamily market in 2023 to see softer demand than in the past several years, we believe that the lagged urban submarket rebound will continue, especially as many employers are encouraging their workers to come into the office a few days a week and many renters appear to prefer living in more urban locations.
We expect that the amenities and new supply that are being developed in the nation’s urban submarkets should continue to draw new renters (and keep existing ones), at least in the short-term, due to still-elevated interest rates and home prices keeping the option of homeownership a little further afield for many renters-by-choice.
2023 will remain a challenging year for the multifamily sector, said Jay Lybik, National Director of Multifamily Analytics, CoStar Group. Notwithstanding, buyer demand remains strong in northern Nevada and will continue for the foreseeable future.
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