Dive Brief: 

• May marked the third consecutive month of rent gains in 2023, but the level of growth is decelerating, according to the latest Matrix Multifamily National Report by Yardi Matrix.
• The average U.S. multifamily asking rent gained $7 in May to $1,716, up 2.6% year over year, 70 basis points below the April rate and the lowest level since March 2021. Occupancy remained unchanged from April at 95%.
• An increasing number of metros where rent growth has turned negative — including Las Vegas and Seattle — has dampened overall apartment fundamentals, the report said.

Dive Insight:

The cities that posted negative year-over-year rent growth are:

• Las Vegas: -2.8%. 
• Phoenix: -2.6%.
• Austin: -1.0%.
• Seattle: -0.9%.
• Atlanta: -0.4%.
• Sacramento: -0.4%. 
• San Francisco: -0.4%.
• Orange County: -0.2%. 

Despite the deceleration, rent growth in May continued in many cities, particularly in the Midwest and Northeast. Indianapolis saw the most growth (7.0% year-over-year), followed by Kansas City and New York City (6.0%), Boston (4.8%) and Chicago (4.6%). 

Slowing demand will likely continue in the short term, Yardi said, as the pipeline has roughly 1 million apartments underway, almost 900,000 units of which are slated to come online by the end of 2024. In fact, in eight major metros apartment stock expansion through the end of 2024 will grow by at least 8%. They are:

• Austin (17.1%).
• Miami (14.2%).
• Raleigh-Durham (13.5%).
• Charlotte (12.8%).
• Salt Lake City (11.4%).
• Nashville (10.9%).
• Jacksonville (10.2%).
• Phoenix (8.8%).

Built-to-rent boom

Yardi also reported that the single-family build-to-rent expansion is continuing. The national average asking rent for SFRs was $2,100 in May, a $7 gain, although year-over-year growth slid by 40 basis points to 2.1%. 

An all-time high of 14,500 new single-family rental homes were constructed across the country last year, up 47% from 2021 and more than double the peak yearly construction rate before the COVID-19 pandemic, according to a new study from RentCafe.

The trend shows no sign of slowing. Nearly 44,700 new build-to-rent homes are underway across the country. Phoenix has the busiest pipeline with 5,500 build-to-rent homes under construction, followed by Dallas at 4,400 and Houston at 2,600.

RentCafe attributed the surging growth of the BTR sector to the lifestyle changes brought on by the COVID-19 pandemic, including social distancing and working from home, as well as high housing prices and interest rates that make purchasing a difficult prospect.