According to a new report from CoStar Group, the national year over year rent growth was 9.2% in the second quarter of 2022, down from 11.4% in the first quarter
Today, CoStar Group released the findings from its second quarter report on rent growth in the United States. According to the nationwide study, while demand is up 9.2% year over year, this figure is down from 11.4% at the end of the first quarter. These findings mark a continued downward trend in rent growth, with this now being the third quarter in a row of diminishing demand. The report also found that the vacancy rate is up 10 basis points, rising to 5% nationally.
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Table showing year over year rent growth, by market in 2Q 2022, courtesy of CoStar Group
“Rent growth moderation in the second quarter is directly tied to the lackluster demand that we have seen over the past 90 days,” says Jay Lybik, National Director of Multifamily Analytics, CoStar Group. “Combine the fact that rent prices continue to sit at all-time highs with tempered consumer demand and a record 450,000 units expected to be delivered by year's end, and you have a perfect recipe for a sharp rise in vacancy rates in the next 6 months.”
Growth in Sunbelt and South Also Slows, But Still Exceeds National Average
While national multifamily rental growth is mostly slowing across the country regardless of city, the Sunbelt and South continued to exceed the national average, with the former holding 4 spots in the top 10 markets. Cities in Florida and Texas exhibited year over year rent growth at least 4 percentage points higher than the rest of the country, led by Orlando, which had the highest year over year rent growth in the country for Q2 at 18.7%, more than doubling the average.
Absorption Underperforming in 2022
CoStar’s report also looked at the more pressing issue of quarterly absorption rates dating back to 2018. The past three quarters have seen absorption holding in the 60,000-unit range which is well below the record totals posted last year but also below average compared to pre-pandemic figures. This is an especially notable stat given that historically Q2 records the highest absorption totals for the year.
Rents sitting at all-time highs plus the tight vacancy rate has tempered demand slightly, as potential household formations can longer afford or find an available apartment to rent. However, making a larger negative impact on multifamily demand has been rising inflation and growing economic uncertainty that has gripped the nation throughout 2022. These factors have pushed consumer confidence to record lows despite employment growth averaging almost 500,000 jobs a month year to date and unemployment sitting at just 3.6%.
About CoStar Group
CoStar Group, Inc. (NASDAQ: CSGP) is a leading provider of online real estate marketplaces, information and analytics. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. STR provides premium data benchmarking, analytics and marketplace insights for the global hospitality industry. Ten-X provides a leading platform for conducting commercial real estate online auctions and negotiated bids. LoopNet is the most heavily trafficked commercial real estate marketplace online. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Homesnap is an industry-leading online and mobile software platform that provides user-friendly applications to optimize residential real estate agent workflow and reinforce the agent-client relationship. Homes.com offers real estate professionals advertising and marketing services for residential properties. Realla is the UK’s most comprehensive commercial property digital marketplace. BureauxLocaux is one of the largest specialized property portals for buying and leasing commercial real estate in France. CoStar Group’s websites attract tens of millions of unique monthly visitors. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S., Europe, Canada and Asia. From time to time, we plan to utilize our corporate website, http://www.costargroup.com, as a channel of distribution for material company information. For more information, visit www.costargroup.com.
This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions, or strategies regarding the future. These statements are based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that the number of units expected to be delivered by year end is not as expected; and the risk that vacancy rates do not increase as expected. More information about potential factors that could cause results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, those stated in CoStar’s filings from time to time with the Securities and Exchange Commission, including in CoStar’s Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, each which is filed with the SEC, including in the “Risk Factors” section of those filings, as well as CoStar’s other filings with the SEC available at the SEC’s website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.