Multifamily Investors And Renters Alike Wonder What Back To Normal Actually Means

The overriding consensus from financial institutions and economic advisers is that U.S. renters should try to keep the total rent outlay at 30% of total income. 

According to Moody’s Analytics, that rent burden has been exceeded at levels historically unheard of. For multifamily investors, high-interest rates are also washing out rent gains, which are beginning to slow. 

But according to a new report from Zumper, rents are returning to what it calls normal. The question remains: In a crazy market with rents skyrocketing during the pandemic and since, what does the term normal mean or look like? 

“We’ve got conflicting signs that should push us to normalcy, and we see a deceleration in year-over-year rent growth at the national level,” Zumper Chief Product Officer Tanguy Le Louarn told Benzinga. “But no one has a crystal ball. We actually thought normal was going to come faster, but we still haven’t seen it.”

Zumper, the largest privately owned rental platform in North America, in its March rent report showed the national rent index rose 0.2% over February numbers for one-bedroom apartments and 0.5% for two-bedroom units. The company says the numbers indicate a deceleration of price increases “and a gradual return to seasonality –– in an industry that spent the last three years defying all expectations.”

But as specific as Zumper’s rent numbers are, the company still doesn’t know where they’re going from here. 

“We are in uncertain times and there’s no clarity,” Le Louarn said. “I wish everyone would just call it like it is and say we’re in a recession. With interest rates as high as they are, it’s unclear what's happening. Rates are rising faster than the rents, and that’s causing pressure on investors.”

Some of the most significant rent drops have occurred in cities popular for digital nomads who fled there during the pandemic and have now been called back to work. One of those remote work-friendly cities — Austin, Texas — is slowly “normalizing,” with one-bedroom median rents dropping for the past three months, including a 4.2% dip this month to an average of $1,600, according to Zumper. 

“The pandemic darling Austin remains the most expensive market in Texas, but those who moved there have returned to the office. Homes are also now staying on the market for 90 days versus 30 days in 2022,” Le Louarn said. 

Zumper also reported that the overall supply of rentals is up in several markets, with new inventory coming online, but added that rent competition is still intense because so many Americans have exited the buyer's market because of high-interest rates. 

g compared to the high rates of 2022. As for the rest of 2023? It’s anyone’s guess. “It’s difficult to say where the floor is, and it’s a market-by-market evaluation. Cities like New York have hit the ceiling, as well as the country’s tech hubs.”