Prospective tenants can help inform housing choices by looking at overall and seasonal rent trends. Just as important, property managers and owners should look for trends that help them develop data-driven forecasts to inform business decisions. While many factors can impact rental prices and vacancy rates, the calculation usually depends upon forecasting supply and demand.
Critical Trends in Multifamily Housing
Rental prices and availability vary by season, demand, supply, and the economy. These factors can vary dramatically in different regions of the country and within specific metro areas. Consider the trends in US multifamily housing while understanding that national patterns may not reflect changes in particular regions or cities.
How Seasonal Trends Impact Demand
Various factors impacting rentals vary considerably because of the season. For instance, the threat of icy roads and bad weather discourages people in cold, northern cities from moving during the depths of winter. Similarly, most families with children try to schedule moves from one school district to another during summer vacation. Thus, most property managers consider summer their peak season and winter a slower time of year.
Apartment List presents with data that demonstrates online searches for new homes tend to peak in late spring and summer but drop off dramatically in the late fall and winter. Demands for movers tend to follow a similar pattern. Thus, few people will be surprised that rental prices and other moving costs tend to increase during warmer months and dip again later in the year. People prefer to move when they expect good weather and without disrupting their children’s educations.
In response to established seasonal trends, many multifamily developments offer move-in specials or reduced rental prices during the slow seasons. In contrast, apartment complexes generally increase prices and reduce specials during the summer without impacting vacancy rates.
Apartment List pointed out that 2021 broke records for its rate of rental price growth and the low number of vacancies. Partly, the coronavirus pandemic slowed construction projects because of supply chain issues, stay-at-home orders, and illnesses. Also, many families decided they needed more space for home offices and activities, which increased demand for existing units.
However, the rapid spike in apartment prices cooled off in 2022. That year also saw a decline in people searching for new housing. The end of the year even saw some dips in rates and slight increases in vacancies. This pattern suggested that rental prices may climb modestly or even level off during 2023.
Perhaps sparked by rental rate increases of 2021 and part of 2022, property developers began more multifamily construction projects but fewer single-family homes. Cities in the Sun Belt led the pace for constructing multifamily units, which should help level out the demand and improve affordability. For instance, three top metro areas where apartment projects surpassed single-family home construction include Austin, TX, Raleigh, NC, and Jacksonville, FL.
At the same time, many of the largest coastal cities, like New York, Boston, Los Angeles, and San Francisco, still need more units to satisfy the demand generated by population growth. These cities also rank in the top 10 for least-affordable rental housing, according to The Motley Fool. Analysts believe these high-cost-of-living areas are less likely to experience dramatic drops in prices or demand within the next year.
The Latest Multifamily Trends
The September 2023 National Rent Report from Apartment List showed a negative trend for rental growth rates, meaning growth has slowed as predicted. At the same time, vacancies have increased to 6.4 percent, the highest since the earliest days of the COVID-19 pandemic.
With fewer people seeking new apartments and construction rates at the highest since the 1970s, average vacancy rates may remain stable or grow modestly in the next year. At least, analysts expect to see little price growth through the end of 2023.