MISSISSAUGA, ONT. — Morguard has released a new report that points to the rental sector in the United States strongly rebounding from a pandemic-induced slowdown while other factors put the brakes on the wider economy.
The 2022 U.S. Economic Outlook and Multi-Suite Residential Rental Market Fundamentals Mid-Year Update stated rental demand “will remain moderately healthy despite coming down from the unsustainable levels of 2021 and early 2022.”
“Economic growth began to slow down in the first half of 2022, following a period of robust expansion and recovery from the unprecedented pandemic influenced retreat of 2020. Multi-suite residential rental demand had surged during 2021 and early 2022 fuelling record-high rent growth, cycle-low vacancy, and a sharp increase in construction activity in many of the country’s largest metros,” the report said.
Multi-suite residential rental construction activity increased recently with inventory of rental units projected to increase by roughly 420,000 in 2022, the report said, with the new projects either highrise or mid-rise developments, and “a large share of these will be delivered in 2023 and 2024. Supply risk has increased substantially of late, with the ramping-up of construction activity across the country.”
The report also cautioned higher interest rates, inflation, supply chain problems and geopolitical events will continue to slow economic growth for the rest of the year and into 2023.
The report cited rising food and gasoline prices due to the war in Ukraine, the Federal Reserve likely continuing to tighten policy until at least the end of 2022, weaker global demand and financial market volatility as factors contributing to economic risk.
U.S. consumer spending growth and housing market activity will also moderate for the near future.
“Spending volume will rise by an annual average of just over 1.8% in 2023/2024, according to the Oxford Economics August 2022 forecast,” the report said.
Spending spiked by 7.9 per cent in 2021, a decade high, and pushed forward with a 2.4 per cent advance forecast for 2022.
However, supply chain issues will negatively impact consumer spending especially for more expensive items such as appliances and electronics. The report cautioned weaker economic and job market performance “will also curtail spending to some degree.”
The entire report, including breakdowns of economic conditions in nine major metropolitan areas, is available here.