It is looking possible that multifamily’s fundamentals in the second quarter will finish stronger than a year ago. It is even possible that the quarter overall may outperform expectations. This is according to CoStar Group, which is basing this premise on April’s rental numbers that are showing every sign that the sector is beginning to stabilize.
“National year-over-year asking rent growth slowed to 2.1% at the end of April from 2.6% at the end of March, vacancy rates held steady and 34,000 units were absorbed, signaling a strong start to the second quarter,” says Jay Lybik, National Director of Multifamily Analytics at CoStar Group.
It is welcome news for the category, which CoStar had put on alert about a month ago that the following 90 days were critical for apartments. The firm’s hope was that absorption can match deliveries by the end of the second quarter to help stabilize this sector, Lybik said at the time. Yet, there’s no guarantee since risks are prevalent, including a potential weakening in the labor market and tighter financial conditions, he noted.
One month later and it appears multifamily may be over the hump.
“With the peak leasing season now underway, multifamily conditions started to show signs of stabilization,” Lybik said.
National average rents rose by 4% to $1,656 from $1,650 last month’s April, according to CoStar. And Heartland Indianapolis showed the highest year-over-year rent growth by a much bigger climb to 6.1%, which was ahead of the nearby Midwestern cities of Cincinnati, Columbus, St. Louis. In fact, the Midwest region took six of the top 10 rent growth spots in April. Fifth in place was San Diego, followed by Chicago, Boston. Northern New Jersey, Cleveland and with Miami coming in tenth.
In other markets, however, year-over-year rent growth slowed as demand for multifamily weakened. Among those are some in the Sun Belt where the uptick is headed down after those markets grew quickly when renters relocated in recent years.