The slew of people moving to the Sun Belt boosted annual revenue and profit for the second-largest U.S. apartment owner even as rent growth slowed.

Real estate investment trust MAA reported core funds from operations, a key performance metric for REITs, rose to just above $1 billion in 2022 from $830.6 million the previous year.

Rent growth boomed across the country, particularly in metropolitan areas throughout the Sun Belt, during the early months of last year. Growth subsided considerably across the nation in the second half of 2022, largely because of new construction and lower demand.

Lead volume and foot traffic remain strong, Eric Bolton, chairman and CEO of MAA, which is based in Memphis, Tennessee, told investors during the REIT's earnings call Thursday. Renters aren't looking to share apartments to lower costs in significant numbers.

“We're not seeing any room-mating trends starting to pick up,” Bolton said.

New lease price growth outpaced renewal rent increases for much of 2022, but that has flipped. MAA ended the year with new leases increasing 13% in rent prices compared to renewal prices being up 14.9%.

During the fourth quarter, MAA said new lease rents increased 2.2% compared to 10.1% for renewals. And so far this year, average new lease rents in January were slightly negative, which MAA executives attributed to typical seasonal performance. They expect the difference between new and renewal lease prices will tighten during the spring when leasing typically picks up.

MAA expects that Sun Belt markets will continue to perform well this year despite a surge of new construction in many markets.

The Sun Belt drawing people from other parts of the country played a big role in the company’s earnings. MAA’s portfolio is concentrated mostly in the Sun Belt, particularly in the Southeast. MAA reported revenue increased to $2 billion in 2022 from $1.78 billion in 2021 and net operating income rose to $1.24 billion from $1.06 billion.

“We still saw 12% of the leases that we did in the fourth quarter were for people moving into the Sun Belt from outside" of the Sun Belt, Bolton said.

Sun Belt states dominated domestic net migration patterns last year, according to a National Association of Realtors report based on U.S. Census data. Florida, Texas, North Carolina, South Carolina, Tennessee, Georgia, Arizona, Idaho, Alabama and Oklahoma made up the top 10 states for domestic net migration in 2022. MAA has apartments in all those states except Idaho and Oklahoma.

Nearly half of MAA's move-ins during the first nine months of last year came from California, New York, Illinois, New Jersey and Washington state, according to an investor presentation from November.

MAA’s apartments in the Orlando market, one of the largest concentrations in its portfolio at 5,220 units, had the highest fourth quarter annual revenue growth at 18.6% compared to the same period in 2021. That part of the REIT’s portfolio also had the highest average rent growth at 20.4%.

The REIT’s Atlanta portfolio, its largest market with 11,434 units, saw revenue growth of 12.5% and rents up 13.4%. MAA ranked No. 2 last year for the largest U.S. apartment owners behind Starwood Capital Group, according to the National Multifamily Housing Council. The industry group's 2023 rankings haven't been released yet.

Bolton said that the transaction market "remains very quiet" and MAA is, likewise, "remaining patient with what opportunities we do see." MAA sold $325 million in apartment properties last year and plans to sell more this year as it seeks to recycle capital from disposing of older properties. It has six new apartment developments in the pipeline now.

But it could be later this year before the transaction market picks up, Brad Hill, MAA's chief investment officer, said on the earnings call.

"Currently, the number of marketed properties is down substantially from 2022, with the majority of sellers waiting until at least the spring leasing season before reevaluating their planned sale timing," Hill said.

Apartment sales slowed considerably in the back half of last year because of higher lending costs associated with the Federal Reserve raising interest rates to tame inflation.

The investment sales market was a topic of conversation at the National Multifamily Housing Council's annual meeting in Las Vegas this week. "Apartment buyers vastly outnumber sellers," Jay Parsons, chief economist for analytics firm RealPage, wrote in a LinkedIn post about key takeaways from the industry meeting.

"Lots of buyers are waiting for better pricing to offset" the higher lending costs, Parsons said.