Rent Growth Continues in Secondary Markets

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By John Triplett -May 14, 2024

Rent growth continues in secondary markets as new apartment construction supply continues to weigh down asking rents in pandemic boomtowns

Many midsize markets in the Midwest, Northeast and South are still experiencing strong rent growth even while new apartment construction supply continues to weigh down asking rents in pandemic boomtowns, according to Yardi Matrix’s Multifamily Research Bulletin.

“Markets that saw explosive growth over the pandemic and that are now experiencing a large influx of supply are generally seeing stagnant or falling rents. Nine of 20 markets that have had rents fall since the beginning of the year are in Florida or Texas, and other pandemic high-growth markets like Atlanta, Raleigh–Durham, Austin and Salt Lake City also have average asking rents that are lower today than they were at the beginning of the year,” writes Andrew Semmes, senior research analyst for Yardi Matrix.

Meanwhile, the secondary markets mentioned above are seeing solid growth in asking rents.

The top secondary markets, which all had over 2% rent growth so far this year, are Albany, N.Y., Milwaukee; Worcester–Springfield, Mass.; Louisville, Ky.; Cincinnati; Des Moines, Iowa.; Richmond, Va.; Madison, Wis.; Portland, Maine; Lafayette, Ohio; Youngstown, Ohio; Providence, R.I.; Northern Virginia; and Scranton–Wilkes–Barre, Pa.

Outlook for the year remains unchanged

“Our overall outlook for the year is little changed. We still expect markets with lots of supply to continue to struggle to realize gains this year, but that is only a supply issue, and once those new units get absorbed all of those markets will be back in good shape,” Semmes writes in the report.

The Federal Reserve is now expected to keep interest rates where they are for longer than originally thought. Also, the prospect for a small downturn later this year is still in the cards.

Conclusion

“Rental growth next year will be stronger than this year, and growth in 2026 will likely be a bit stronger still, as it will take some time both for the Fed’s eventual rate cuts to meaningfully impact consumer demand and for the current influx of supply to be fully absorbed,” Semmes writes in the report.

Source: https://rentalhousingjournal.com/rent-growth-continues-in-secondary-markets/

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