Rents in most American cities continue to rise slightly each month but are not duplicating the rapid escalation rates exhibited in 2021. But given ongoing gains, Yardi Matrix has revised its end-of-year projections upwards for most markets in a new special report. Average month-over-month asking rents increased by 1.1 percent in May compared to the one percent month-over-month increase in April. However, year-over-year asking rents decelerated, from 16 percent in April to 14 percent in May. “While we are seeing the usual seasonal increase leading into the summer months, 2022 does not look like a repeat of 2021 even though rent growth remains elevated,” state Matrix analysts. Asking rents fell in only six markets: the gateway markets of Queens and Brooklyn; small Southern markets Macon, Ga., and Jackson, Miss.; and tropical Honolulu and the Southwest Florida Coast. Conversely, 84 markets experienced greater than one percent month-over-month increase, and seven markets saw month-over-month growth that topped two percent: Charleston, Knoxville, the Bay Area-South Bay, Miami, the Urban Twin Cities, Wilmington, N.C., and Portland, Maine. Most markets received an increase to their end-of-year projections in the newly released Matrix report. The biggest increases were concentrated in markets that continue to outperform expectations, with Scranton-Wilkes-Barre, Wilmington, South Bend and Spokane all seeing a more than five percent increase for year-end 2022. The nation’s economic outlook plays an important role in rent forecasts. That outlook has become increasingly tumultuous, with inflation at a 40-year-high but unemployment historically low. Analysts are continuing to keep a close eye on the market and monitoring the impact of the Federal Reserve’s approach to combatting inflation as well as the war in Ukraine. “The Fed will likely ramp up its pace of rate hikes and quantitative tightening, increasing the chance of recession for...

Yardi Matrix reports another strong summer for the multifamily real estate sector. The fundamentals were downgraded from “great” to “consistently good” but several factors suggest continued, healthy performance. Even rapid development in some of the nation’s hottest markets has slowed to a more sustainable pace due to construction labor shortages. The shortages may have longer-lasting effects due to disaster recovery efforts throughout the United States. Rents For the last year-and-a-half, rent growth as gently declined as rents inched upward. The rent growth deceleration may be drawing to an end, though, as the supply boom reaches it apex. National average rents increased by 2.4% on a year-over-year basis in August, yet are down from 4.6% at this time last year. Deliveries are not manifesting as quickly as previously anticipated, which should moderate rent increases. The long-term outlook for multifamily seems promising due to favorable fundamentals and demographic trends: Millennials are forming households, wage growth remains solid, and the economy is relatively healthy. Hottest Markets The hottest metros for rent growth are still secondary markets that are lagging on supply. Tacoma (8.1 percent), Sacramento (7.7 percent), Colorado Springs (7.6 percent) and the Inland Empire (4.3 percent) are four of the fastest growing markets yet they’re only estimated to increase stock by 1 percent this year. These markets benefit from their proximity to larger markets such as Seattle, the Bay Area, Denver and Southern California. They enjoy vigorous employment growth and popularity with Millennials. The young renters look forward to the areas’ desirable lifestyles with lower costs. There are always exceptions. Seattle faced 5.9 percent rent growth regardless of the surge in supply.  Analysts are exploring the connection between rents and the city’s increased minimum wage. Minimum wage increased from $9.47 in 2015 to $13. Nashville is...

For the first time in four years, average rents in Manhattan are decreasing across the board. In the past, rents occasionally declined in one or two floor plans. Larger units demonstrated the most notable price fluctuations. Highly sought-after studio units were most likely to maintain consistent or climbing value. Yet according to a recent Bloomberg report, the current decrease in prices applies to apartments of all sizes. An increase in supply is the main catalyst.  Recent construction has given Manhattan renters more options. The Eugene, the tallest residential skyscraper in the city, began leasing this year. Vitrea and Waterline Square, both with jaw-dropping architecture, are also enticing renters their way. Throughout Manhattan, more than 20 new buildings will start leasing this year, according to Curbed. The new competition has created an atmosphere that hasn’t existed since 2012: excess apartments sitting vacant on the market for weeks. The conditions encouraged many landlords to explore less expensive asking rents—for Manhattan, anyway. Bloomberg reports that median rents for studio apartments dropped by 2.6 percent. In February, that translated to a median list price of $2,500. Prices for one-bedroom units fell by 1.3 percent to $3,350. Two-bedroom apartments declined the most, dropping 5.2 percent to $4,500. With a decrease of 3.7 percent, three-bedroom units have the second farthest decline. These units average $6,031. The median rent price for all units decreased 0.9 percent to $3,350. Landlords have dropped asking prices by an average of 3.3 percent, 0.8 percent lower than February 2016, report appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The report highlights 6,872 vacant units at the close of February. That’s 12 percent more vacancies year-over-year. Melinda Sicari, a broker with Douglas Elliman, recalls the change in customer bravado, “In the months of January...

It’s the perfect combination: a boost in local jobs, diminishing office supply, and rising rents. The three have positioned the Atlanta office market for a record-breaking year. With a conservative lens, JLL lists the Atlanta office space vacancy rating at 17.5 percent and average rents of $22.54 per square foot. Transwestern confidently states a 15.9 percent vacancy rate and average rates closer to $25. In both scenarios, this quarter marks one of the highest asking rents in nearly 30 years. There is still room to grow. Conditions suggest that asking rents could approach $30 per square foot: PM Realty Group estimates that Atlanta broke its 2000 occupancy gain record. The market totaled almost 3.7 million square feet of office space absorption for 2015. The resulting 14.2 percent vacancy rate for Class A properties broke a 15-year low, according to Transwestern. Atlanta’s Class A direct occupancy rates broke a 14-year record, increasing by 300 basis points to 86.7% over the prior 12 months. Class B office space accounted for 29.7% of the total net absorption for 2015. Just three years ago, Class B office product saw negative absorption in Atlanta. Demand for quality office space in Atlanta continues to grow. BisNow reports that Metro Atlanta is expected to add 60,000 jobs per year for the next few years. Nearly 25 percent will be “premium” jobs that require office space—yet only 885,000 square feet of office space is under construction for the year. If 885,000 square feet doesn’t sound like a game-changing amount of space to you, you’re not alone. It’s barely a drop in the preverbal bucket. With the exception of residential, many investors still see real estate as a risky investment. Funding for new construction remains scarce, which means that existing Class A properties...

Increasing fees without losing tenants is all a matter of presentation. When the economy slumped, many businesses explored ways to cut costs and stay afloat. Some property management companies offered fees as low as 4 percent in exchange for basic services. Owners jumped on these contracts, using the low costs to attract renters to their properties. Now, as supply lags behind demand in many cities, it’s a managers’ market. Some are raising their fees and exploring ways to improve the services provided to owners. This creates the ideal opportunity to re-evaluate your property management services. Can you provide residents with the online and mobile conveniences offered by other properties? Are tenants satisfied with property upkeep? Taking advantage of improved management services could lead to higher quality tenants, longer-term tenant retention, greater tenant satisfaction, and less hair pulling on your part. Improved services will likely lead to higher fees from your service provider, typically between 8-12 percent. Pass those increases on to tenants; when you can offer more to your residents, you can ask for more in return. It’s important to make sure that residents still feel that they are getting a great deal. Their perception depends on your presentation. You are willing to sign on to a better management contract with higher rates because of what you will gain. Likewise, it’s important to let renters know what they’re gaining as the costs increase. That’s not to say that the improvements offered must directly correlate with the change in fees. Announce the increase in fees at the same time as other property improvements. Tenants will connect the slight raise in payments to tangible improvements. If you’ve planned to pressure wash exteriors, paint, redesign landscaping, update appliances or resurface the pool, this is the perfect time...

Just when we thought the housing market was stabilizing, the Mortgage Foreclosure Debt Forgiveness Act ended. To date, the act has not been extended, which could lead to a few notable changes in both the single-family and multi-family markets. Before 2007, a mortgage owner could receive a break on their loan as long as that forgiven debt was taxed. When the Mortgage Foreclosure Debt Forgiveness Act passed that year, it eliminated the tax on forgiven debt, allowing more cash to stay within the household. Homeowners were able to get back on their feet and into a rental—or even another house–more quickly. In January 2014, the Mortgage Foreclosure Debt Forgiveness Act came to an end.  According to the National Association of Realtors, reinstating tax on forgiven debts may affect many of nearly 10 million Americans with underwater properties; currently, 14.5 percent of homes in the US are still in negative equity, reports the National Association of Attorneys General. Homeowners with underwater properties will be dissuaded from short sales and other measures of foreclosure prevention since they often don’t have the means to pay the difference between the mortgage cost and the home’s current value. They likely unable to pay high taxes on forgiven debts, either. Homeowners may still qualify for an insolvency exclusion but it’s a tedious route The result: more foreclosures. RealtyTrac reports that more than 1.2 million properties throughout the nation are in some stage of foreclosure. States such as Delaware, Maryland, and Connecticut were inundated with distressed properties during the recession and they will continue to see high numbers of bank repossessions. With fewer assistance programs in place, these homeowners will continue to enter the rental market in numbers higher than previously expected. The continued flow of tenants may keep vacancy rates...