Depending on who you talk to (or where you get your information), multifamily is either a strong sector that’s performing well or one that could be negatively impacted by maturing loans. Q2 2023 numbers indicate a decline in investment volume and an uptick in vacancy, while rent-growth numbers vary significantly. Apartment List’s September 2023 Rent Report showed negative annual and monthly rent growth, while Yardi Matrix’s July 2023 report stated 1.6% year-over-year rent growth. In its Summer 2023 U.S Family Outlook, Yardi Matrix noted the market faces challenges related to potential economic downturns and rising interest rates which erode property values but also potentially increase distress levels for investors .
The situation with single family housing shows mortgage rates have increased quickly due to the Federal Reserve’s continued hike of the Effective Federal Funds Rate – Freddie Mac reported average fixed 30-year mortgage rate of 709%, highest since April 2002 – making it cheaper to rent than buy at this time . Home prices are increasing as inventory slows , creating limited options for homebuyers according to The Economist article from August 2020 . Existing home sales dropped 2% month over month & 16% year over year according National Association of Realtors (NAR) Chief Economist Lawrence Yun citing unfavorable inventory availability & mortgage rates as reasons driving current activity levels .
Multifamily fundamentals remain positive despite lower rental growth , middling absorption & higher vacancy due partly new units coming online; IPA reported 950K units under construction at start Q2 2020 with 400K expected completion this year representing largest delivery volume on record ; RentCafe added another 1M rentals set complete through 2025 despite headwinds per Yardi Matrix research findings
Analysts Marcus Millichap Institutional Property Advisors predict ongoing homeownership challenges will lead longer term renters particularly among late twenties early thirties cohort; CBRE researchers agree shortage sale home inventory combined increased mortgage rates “may bode well multifamily properties likely see fewer residents moving out purchase own home” said Sam Tenenbaum Cushman Wakefield Head Multifamily Insights recently released video
