Radix Q2 Rental Housing Trends Project Weak Leasing Season

Key market indicators remain flat or in year-over-year decline for more markets

SCOTTSDALE, Ariz., June 12, 2024 /PRNewswire-PRWeb/ -- Radix, a pioneer in multifamily market research, performance and data analytics, today released its monthly results for leasing and traffic analysis, as well as updated industry projections for 2024.

The rental housing industry has seen a slight uptick in rent and occupancy growth so far in Q2 ? typically the peak leasing season ? but the pace of improvement is muted compared to seasonal norms. While apartment operators may continue to see rents and occupancy rates moderately rise through mid-summer, before leveling off, the continued supply pressure indicates that multifamily will likely end the year with negative annual rent growth.

Select markets have proven resilient to current trends. Major metros like Washington, D.C., Boston and Chicago have demonstrated growth rates closer to long-term averages. Several other markets in the mid-Atlantic, Northeast and Midwest are performing much better than the national average, as well. Isolated submarkets in some of the weaker metros have shown stable growth, too. Larger markets with notable oversupply have a longer road to stabilization. For example, Atlanta, Raleigh, and Austin need substantial rent growth improvement just to reach industry norms. At the end of May, rents were down more than 5% from the prior year in each of those markets compared to the national average of a 1.5% decline.

Likewise, occupancy, which concluded Q1 2024 at 93.9% for the U.S., showed minimal improvement and essentially flat growth since the end of last quarter. The industry averaged 94.6% occupancy from 2018 to 2023, a rate generally considered "full" by the industry, but new supply is challenging operators to reach previous norms. More than 610,000 multifamily units, or 2.2% of existing stock, were delivered in the U.S. in the 12 months ending May 2024, close to a 40-year high. Occupancy is forecasted to remain near the current level through the end of the year.

The U.S. numbers mask the underlying differences based on location. Nine markets had occupancy rates of 95% or higher. New York, San Jose, Washington, DC and Boston were among the highest occupied markets, and their inventory growth averaged 2.1% for the year ending in May. On the other end of the scale, four markets had an occupancy rate of 93% or lower, including: Dallas, Austin, San Antonio, and Atlanta. Those markets had an average inventory growth of 5.0%, more than double their top-performing counterparts. For those metro areas, a strong leasing season was needed to absorb the new stock.

"The second and third quarters have the strongest demand for leases in multifamily; it's like clockwork every year. The normal seasonal surge hasn't happened to the same degree this year, and we are seeing very flat growth rates," said Jay Denton, Chief Economist at Radix. "The positive news is that performance is at least holding steady as the massive wave of supply continues to hit the market. The question is what happens in the fall, especially if the economy softens. We are currently projecting rents to decline 1.1% this year at the national level, and even that could continue to decline if the job market softens."

Leading indicators, such as traffic counts, do not hint at major improvement this year. Traffic counts have lagged behind last year's pace by approximately one tour per week. While that number might not sound like a lot, it adds up throughout the year and ultimately results in the loss of more than a full month of tours on a cumulative basis.

Weaker tour counts typically equate to fewer new leases, which limits occupancy growth and rents. The main reason occupancy has held steady despite new supply is an industrywide emphasis on resident retention.

Radix predicts a more balanced market in 2025 as the level of new supply begins to moderate. Performance metrics are projected to improve, and more locations will switch from a contraction in rent growth and occupancy to recovery and expansion.

"The economy will be the wild card," Denton said. "But 2025 is shaping up for growth rates closer to what we saw before the pandemic."

About Radix

Radix is a market insights platform designed specifically for the multifamily housing industry to provide actionable data and analytical tools that allow owners and operators to accurately assess and strengthen their position in the competitive marketplace. Since its inception in 2016, the Radix platform focuses on streamlining the data analytics process to save time and money, while creating greater data consistency and broader collaboration within the organization. The Radix Renters' Portal also provides equal market visibility for apartment seekers, creating unprecedented transparency for all parties. Radix provides unique, intuitive insight on complex and ambiguous data, empowering users to improve performance through more informed decisions.

Media Contact

Marlena DeFalco, Radix, 1 303-682-3943, [email protected], www.radix.com

SOURCE Radix