Deceleration Is The Best Way To Describe Rental Prices That Aren't Cratering Any Time Soon

The good news for multifamily investors is that their properties could be resilient to significant monthly rental price shifts because of the continuing lack of home and rental inventory. 

According to the latest numbers, that appears to mean bad news for tenants hoping U.S. rents are dropping soon.

According to a new report from Moody’s Analytics, the average American renter is now paying more than 30% of their income on housing with the fear wages are not keeping up with rent hikes. 

The Bureau of Labor Statistics’ consumer price index (CPI) is reporting “shelter” makes up 34% of the U.S. inflation index. In January, the CPI said those costs rose 0.7% monthly and 7.9% year to year. 

Apartment List data shows rental costs are up 3.3% year over year and are also slowing. But slowing is the crucial word in these analyses, according to Anthemos Georgiades, CEO of the Zumper rental platform. 

“Rents are decelerating, but they’re not inverting,” he said. “But they’re definitely decelerating in their rate of growth.” 

Zumper’s take is that rent prices for one-bedroom rentals fell by 0.3% in January to $1,492. The average for a two-bedroom remained flat at $1,822. Those numbers are still 7% and 9% higher, respectively, year over year. 

Georgiades says the CPI numbers, which report on six months of lease activity, will take a while to catch up to current conditions. “The way leases go, people live in apartments for 18 to 24 months, and it takes a while for inventory to turn.”

Georgiades also agreed that, though overextended, multifamily property investors have little to worry about in the near future regarding rents. 

“The U.S. is so chronically undersupplied in real estate,” he said. “We still have an imbalance of supply, and multifamily investors and even single-family investors will be resilient.”

Meanwhile, developers and investors of multifamily properties can’t build fast enough. Realtor.com reports that a record number of multifamily units is under construction for the fourth consecutive month, with 932,000 in January.

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