Multifamily rents in the U.S. dropped by $2 in June to $1,457, following a four-month trend of declining rents, according to Yardi Matrix’s June 2020 National Multifamily Report. Since January, average multifamily rents have decreased by $12.
For the first time since December 2010, year-over-year rent growth shifted to negative, falling to -0.4 percent in June, a 70-basis-point decline from May. The is compared to last year, when the first half of the year saw 2.6% rent growth and 1.2% growth in the second quarter.
Despite the national trend of declining rents, Midwest markets have shown some growth, like in Indianapolis, where rents increased by 0.8 percent year-over-year, and in Kansas City, where rents rose by 1 percent year-over-year.
“These markets have significantly lower population densities than gateway cities and therefore remain attractive, considering social distancing requirements and work-from-home policies,” Yardi Matrix’s report states.
With the aid of benefits from the CARES Act, July 2020 rent collections, thus far, have not seen a big hit, with collections about 2 percent below what they were the same time one year ago. However, with the expiration date of these benefits in sight, August may paint a more accurate picture of renters’ financial situation, unless the government extends benefits with a new stimulus package.
West Coast and tech hub markets were the hardest hit by annual rent declines in June with San Jose (-4.6 percent) and San Francisco (-3.8 percent) experiencing the sharpest declines. However, more affordable California markets like Sacramento (2.2 percent) and the Inland Empire (2.9 percent) preserved positive rent growth year-over-year.
Month-over-month, rents declined 0.1 percent in June, a 20-basis-point improvement from May. Out of the top 30 markets, rents declined in 19 markets.
“Tech hub markets like Seattle (-0.4 percent), Austin (-0.3 percent) and Phoenix (-0.2 percent) have been hit particularly hard,” Yardi Matrix’s report reads. “All have large amounts of inventory coming online, and Austin and Phoenix are among the markets with a surge in coronavirus cases.”
Since mid-March, jobless claims have totaled nearly 50 million people. However, Yardi Matrix’s report also noted that preliminary data shows about 2.7 million jobs were gained in May and 4.8 million were gained in June, suggesting that many job losses were temporary.
Given the rise in COVID-19 cases in many areas of the country over the past few weeks, Yardi Matrix anticipates an sharp slowdown in progress from prospective to planned, planned to under construction, and under construction to lease-up properties by as much as 40 to 60 percent.
Those markets expected to receive the most deliveries as a percentage of existing stock in 2020 include Wilmington, Delaware (7.4 percent of existing stock forecasted to be delivered); Reno, Nevada (6.9 percent); and the Southwest Florida Coast (6.6 percent). Gateway markets hardest hit by the pandemic are projected to receive some of the lowest deliveries, including Manhattan, New York (0.7 percent of existing stock forecasted to be delivered); Washington, D.C. (1.3 percent); and Los Angeles (2.5 percent).
Denver is one metro area that may actually be dealing with decreased occupancy rates in the near future as a result of a surge in deliveries in recent years. This influx in deliveries combined with impacts of the pandemic has resulted in a year-over-year decline in occupancy of 1.2 percent, one of the most significant declines across the top 30 markets. Still, the market will likely rebound relatively quickly because of steady in-migration to the area and a more educated workforce that is less likely to be as negatively impacted by layoffs and furloughs.