A large amount of multifamily housing supply coming online is expected to suppress national average asking rent growth this year, according to a new special report from Yardi Matrix. The report also showed that Phoenix is among the cities that saw the largest rent decline in 2023.

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While national average asking rents grew by 1.6 percent in 2023, the new supply will serve to depress rent appreciation this year “in many of the markets that saw explosive growth during the pandemic.” Some markets could end the year with slight negative growth. Stronger growth is anticipated in the working-class Renter-by-Necessity segment, as most of the new supply comprises upscale Lifestyle units, the report adds.

Pandemic rent growth boomtowns including Las Vegas; Boise, Idaho; Phoenix; and Austin, Texas, saw the largest rent declines in 2023. Medium-size cities with large universities such as Madison, Wis., Knoxville, Tenn., and Syracuse, N.Y., were among the top performers.

Cities with the biggest rent decline in 2023

• Las Vegas at -2.5%

• Boise at -2.4%

• Phoenix at -2.2%

• Austin at -1.6%

• Reno at -1.2%

Another key story in 2024 is the continued compression in the spread between in-place rents and asking rents. Most markets still have a large gap between the two, but it will “continue to shrink as asking rent increases remain muted in the near term,” according to the report, which also predicts that the national economy will “slow significantly for two or three quarters.”

The large volume of supply slated to come online in 2024 will take time to be completely absorbed. Afterwards, rent growth will return to the typical 3 to 4 percent annual increase in asking rents. Read Matrix’s analysis in the new Multifamily Rent Forecast Update.

Yardi Matrix offers the industry’s most comprehensive market intelligence tool for investment professionals, equity investors, lenders and property managers who underwrite and manage investments in commercial real estate. Yardi Matrix covers multifamily, student housing, vacant land, industrial, office, retail and self storage property types. Email matrix@yardi.com, call 480-663-1149 or visit yardimatrix.com to learn more.