Multifamily is a strong sector that has seen an uptick in vacancy and investment volume decline, according to Q2 2023 numbers. Rent-growth numbers vary; Apartment List’s September 2023 Rent Report indicated negative annual and monthly rent growth while Yardi Matrix’s July 2023 report stated 1.6% year-over-year rent growth. Yardi Matrix’s Summer U.S Family Outlook noted multifamily’s strong performance through the middle of the year, but mentioned potential economic downturn and rising interest rates could erode property values while potentially increasing distress.
The Federal Reserve’s continued hike of the Effective Federal Funds Rate has resulted in mortgage rates reaching their highest since April 2002 at 7.09%, as reported by Freddie Mac – making it cheaper to rent than buy for many households due to principal and interest payment on a mortgage for a medium priced home being higher than average rents ($389). Additionally, The Economist recently noted that homebuyers face limited inventory with demand falling as rates have risen yet supply also decreasing almost in lockstep with demand decrease . NAR Chief Economist Lawrence Yun commented that two factors are driving current sales activity – inventory availability & mortgage rate – both unfavorable to buyers leading existing home sales dropping 2% from month before & 16% on yearly basis .
Construction underway at beginning of Q2 saw 950K units being built with 400K rentals expected this year alone; another million new rentals are set be completed through 2025 despite headwinds according Marcus & Millichap Institutional Property Advisors research who believe ongoing homeownership challenges will lead longer term renters especially amongst late twenties early thirties cohort , CBRE researchers agreeing shortage of for sale homes combined increased mortgages bodes well multifamilies likely seeing fewer residents moving out purchase own homes
