Creating Opportunity

By on May 10, 2024 in Matrix

Yardi Matrix hosted its Q2 2024 Multifamily Webinar this week, providing more than an hour of useful insight and analysis on rent performance, supply dynamics and opportunities for investment in the sector.

Yardi Matrix hosted its Q2 2024 Multifamily Webinar this week

Miss Jeff Adler’s insight? View the presentation recording or review the slide deck on the Yardi Matrix website. The latest Matrix monthly multifamily report can also be found here.

The average U.S. asking rent gained $6 to $1,725 in April, up 0.7 percent year-over-year. Meanwhile, occupancy remained at 94.5 percent in March, a rate it has held since the beginning of the year.

“All things considered, March and April were positive months from a seasonal standpoint, April is right in line with (a typical) seasonal uplift in rents,” said Adler, vice president of Yardi Matrix.

Topline webinar takeaway: rental market performance currently varies by region, with factors such as supply response, job growth, and regulatory issues playing critical roles. And while rents for “renter by necessity” properties have increased, margins have not necessarily followed suit due to rising expenses, especially insurance.

Regional trendlines include the Southeast, where rents are decreasing due to a high volume of new supply. In the Midwest, there are more modest completions and good rent growth, making it an attractive option for portfolio diversification. Cincinnati, Omaha and Lexington led year-over-year rent growth last year. Columbus, Louisville and Dayton are also performing well in 2024.

More generally, select tertiary markets are performing well because job growth is driving demand without a significant supply response. Madison, Louisville, Milwaukee and Grand Rapids top that list, supporting the strong performance of the Midwest overall.

In addition to a thorough look at the state of the U.S. economy (food for thought: household sentiment doesn’t align with the generally positive perspective presented by the government and media), interesting tidbits for real estate owners and investors include:

The aftermath of the pandemic has brought about a significant increase in flexibility for office-using employees, with a notable rise in remote work. This shift has implications for the housing market and challenges traditional notions of location value.

Work arrangements vary across sectors, with around 35 percent of professionals fully back in the office, 35 percent fully remote, and the remainder adopting hybrid structures. This distribution influences population movements within and across metropolitan areas.

Younger Americans are returning to major metro areas to live, particularly along the East and Midwest coasts, leading to a revitalization of some gateway cities. New York, Chicago, Boston and Washington D.C. top the list.

Adler personally observed varying levels of activity in downtown areas based on his recent travels, with some cities experiencing significant construction (such as Nashville) and others less so (Austin, and particularly San Francisco). There is an excess of office space in many, leading to potential consolidation and conversions to other uses.

Housing affordability remains a significant issue, with rental costs high relative to incomes, particularly for lower-income households. Market responses and public policy interventions are discussed as potential solutions to address affordability challenges.

innovative approaches to affordable housing are gaining traction, particularly in Texas and Florida. Texas is offering developers property tax exemptions in exchange for creating affordable housing, leveraging concepts similar to the Low Income Housing Tax Credit (LIHTC) Program. Florida employs comparable strategies, and even rural Montana is enacting zoning reform to encourage affordable development.

Engagement with large employers who need affordable workforce housing is also emerging as a proactive approach to housing challenges.

“I’ve had discussions with folks who are basically saying, ‘I’m not going to wait for the government, I’m going directly to employers, school districts, hospital systems, and other large employers who have housing as a business impediment to their operations.’ They are willing to do things to enable new housing to be delivered at price points much lower than you could do on a private sector basis,” Adler said.

Next week, Matrix will introduce a new tool that includes new proprietary data on 26,000 affordable properties across the country and offers invaluable business intelligence for LIHTC real estate deals. Existing subscribers will receive the information as an upgrade to their current plan; contact your Matrix rep to learn more.

Interested in more investment insight from the webinar? View the presentation recording here.