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Multifamily rents increased slightly in March despite the nation’s economic challenges. According to the latest Yardi Matrix Multifamily Report, U.S. asking rents saw a $3 increase last month to $1,706, while year-over-year growth decelerated to 4% nationally, 90 basis points less than February and the lowest level since rents began their unprecedented climb in April 2021.

“The first quarter produced no gain for multifamily rents for the first time in a decade, but the results come as somewhat of a relief,” said Matrix experts. “Multifamily demand has held up well despite the attention given to the Federal Reserve-induced economic slowdown, bank failures, and the deceleration from the outsized rent gains of the last two years. Rents and occupancy are stable as the market heads into the growth season.”

Out of Yardi Matrix’s top 30 metros, 21 experienced positive rent growth year over year, with metros in the Midwest and Northeast remaining at the top of the list. Indianapolis held the top spot, seeing an 8.6% increase, followed by New York and Kansas City, Missouri, with 6.9% increases; Boston with a 5.8% increase; and Chicago with a 5.2% increase.

Month over month, asking rent growth turned positive after four months in which rents dropped overall. According to Yardi Matrix, gains were led by Acela Corridor metros—Boston at 1%; Washington, D.C., at 0.8%; New York at 0.6%; and Baltimore at 0.5%. Indianapolis also saw 0.8% month-over-month growth.

National lease renewal rent growth increased by 30 basis points to 9.3% year over year through January. Renewal rent growth has been slowing since peaking at 11% in the fall and is expected to drop closer to the asking rent growth levels. National lease renewal rates were 63.9% in January, down from 65.2% in December.

“However, the short-term increase demonstrates that many renters have the wherewithal to afford increases, that demand is not falling as significantly as feared, and that tenants looking to move to reduce their monthly charges have limited options in many metros,” stated the report.

The single-family rental (SFR) sector also saw month-over-month gains in March. National asking rents for single-family rentals increased last month by $5 to $2,079; however, year-over-year growth declined by 80 basis points to 2.8%. Occupancy rates also decreased 10 basis points in February to 95.5%.

“After a weak 4Q 2022, demand for SFRs picked up in the first quarter of 2023, though the capital climate remains challenging,” noted the report. “Single-family home sales are still tepid, as mortgage rates and prices remain high, driving demand from renters that want the amenities of a house but don’t have the resources to buy one. SFR rents and occupancy rates remain strong.”

However, according to the report, tight conditions in the capital markets have created issues for some SFR owners, who have announced layoffs or cutbacks in acquisition plans. More SFR investors are growing through build-to-rent programs, but these efforts also are being hampered by the increased cost of construction financing.