Apartment rent increases show signs of cooling this summer

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One-bedroom apartment rent growth moderated in June and rent for two-bedroom apartments has dropped from May, according to the Zumper National Rent Report.

Median one-bedroom rent increased 0.5% last month, an all-time high, but rising at a lower growth rate than the one to two percentage point increases notched during the height of the pandemic. Median rent for a two-bedroom flat, meanwhile, fell 2.9% from the previous month.

The June data aren't following the typical trend of peaking in the summer as it's normally the busiest moving season, a sign of just how much the COVID-19 pandemic disrupted the industry. The moderating rents dovetail with the cooling of the housing market. Redfin reported that the median asking price of newly listed homes for sale fell 1.5% from the all-time high in the spring as mortgage rates rise. On average, 6.5% of homes for sale each week had a price job, the real estate broker said.

New York City stands as the most expensive city for apartment rents, with the median one-bedroom rent of $3,600, up 40% Y/Y. That comes in $600 higher than the second most-expensive city, San Francisco, at $3,000.

Miami's red-hot market is showing signs of cooling, dropping two spots to the fifth most expensive market at $2,400. San Jose, California, now sits at the third highest spot with $2,570 median rent for a one-bedroom. Boston comes in fourth at $2,500.

It's not surprising that multifamily REIT stocks are falling in Tuesday afternoon trading: AvalonBay Communities (NYSE:AVB) -1.4%, Equity Residential (NYSE:EQR) -1.3%, Independence Realty Trust (NYSE:IRT) -1.7%, Camden Property Trust (NYSE:CPT) -2.1%, and Apartment Income REIT (NYSE:AIRC) -1.4%.

Earlier Tuesday, Homebuilder, real estate broker stocks climb even as recession fears mount

Comments

[8535911]

The very large group of people locked out of home ownership by an acute shortage and high prices for starter homes intensified by a return to meaningful mortgage rates continues to increase, not decrease. Multi-family REIT investments continue to make sense. Sector weakness should be bought, not sold...

[volpe21]

“It's not surprising that multifamily REIT stocks are falling in Tuesday afternoon trading”
It's not surprising because the algo's are methodically selling anything on the NYSE at the moment.

On a serious note, that quote paints a picture darker than it actually is. One reason i wouldn't be surprised is that inflation growth is "allegedly" slowing, (though i'm still waiting to see the next couple printout's on that one before i truly agree). If i'm a landlord, i'm going to do my best to closely track rent growth with the macro-environment - namely my costs. I want to be profitable, not priced above all the competition in my locale. All in all, slowing rent growth does not have to mean anything negative at all. Multifamily was making money 5-10 years ago when rent was a lot lower (and costs were lower). It's all relative. If management strategizes finances appropriately, business will continue on. Nothing to see here.

[ccking3]

“It's not surprising that multifamily REIT stocks are falling in Tuesday afternoon trading”.

Well I am surprised. First bond rates are down today and the data you cite simply shows that the growth rate in rents is declining. Well you surely can’t raise rents 20% a year for long but the year over year rate increases in the data are still very healthy. Reported FFOs for 2Q and the next twelve months are going to show double digit growth. The fact that Miami rent increases have dropped form 40% to 20% year over year for example can otherwise be seen as huge growth continues. Will be interesting to see the 2Q earnings calls and forward guidance but the likelihood is that guidance will again be raised. So count me as surprised.