Which Multifamily Markets Have Changed the Most in 2022?

The latest rent report from Apartment List points to some interesting changes for individual markets even as the multifamily market at the national level shows consistent strong performance.

2022 is still a great year for multifamily assets. Rent growth is not at 2021 levels, but if we kept at 2021 levels, that would be insanity. We’re well above any other year than 2021. I do think we’re approaching an inflection point, but instead of a sharp correction, we’re hovering at a stable, but elevated, new level.

Some quick numbers from Apartment List’s report to put this in more concrete terms: Year-over-year rent growth is at 14.1%, Month-over-month rent growth is at 1.3%, and year-to-date rent growth is at 5.4%. In 2021, year-to-date rent growth was at 8.8%, which is incredibly high. The average for the pre-pandemic years 2017-2019 was about 3.36% year-to-date rent growth. I think “elevated” still holds true here: 5.4% is less than 8.8%, but it’s more than 3.36%.

In the spirit of the once-hoped-for “soft landing” from the Federal Reserve, we could see a cooldown in rent growth, maybe later this year, but it’s difficult to imagine what set of circumstances would lead to a downturn that’s as sharp as the up-tic in housing demand we’ve seen in the past 2 years.

The map of each market’s rent growth shows just how strong this up-tic has been. They color code this map such that light blue represents markets with less growth, orange with moderate growth, and the darkest orange/red is for the highest-growth markets.

That dark orange color maxes out at 40%, but there are numerous markets on this map with higher rent growth than 40% since March 2020. We’re off the charts here. We’re off the map.

Apartment List could re-think comparing rents against March 2020 numbers, or they could expand their color-coded system. Make that dark orange fade into solid black at 60% rent growth. I’ll bet, by the end of this year, we’ll see a decent number of markets or sub-markets with rents up 60% since the start of the pandemic.

Stable, elevated rent growth is the big takeaway from this report, but given the inflection point environment I’ve been thinking about, I’ve been taking a closer look at the shorter-term growth of certain markets. 

The markets that have grown the most in the past 6 months are slightly different than the year-over-year leaders. Las Vegas, for instance, is among the leaders for rent growth since March 2020, but it’s had the lowest rent growth of the past six months.

Markets in the Northeast, on the other hand, are really catching up in 2022. Likewise, San Jose, which had the second lowest rent growth since March 2020, now leads the nation in rent growth over the past six months. The recovery of markets like San Jose and Seattle as well as the growth in Northeast markets paints a different picture than last year, one in which Sunbelt markets are sharing the spotlight with other successful markets throughout the country.

Interested in more of our thoughts on this topic? Watch the clip from the Gray Report below for additional insights and commentary from the Gray Capital team.

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