Market Insights | Summer 2024 | National
Summer 2024
Average
Rent
Average
Occupancy
YoY Sales
Volume
YoY Rent
Change
Multifamily demand strengthened in the two quarters of 2024, coinciding with the healthy pace of consumer expenditures. Absorption in Q1 2024 was the highest since 2021 at 117,000 units, and final data for Q2 2024 demand is estimated at 150,000 units absorbed. Even with demand increasing momentum, heavy construction pipelines continue to saturate market areas with deliveries. The markets that experienced a surge of in-migration during the pandemic, primarily in the Sunbelt states, have been most affected. Downward pressure on occupancy levels followed suit.
The number of construction starts decreased and absorption steadily increased in the first half of 2024, positive indicators that the supply and demand imbalance should begin to stabilize by the end of the year and into the first half of 2025. The Midwest and Northeast markets have the most advantageous conditions for rent growth, due in part to the more moderate pace of deliveries over the past two years.
Freddie Mac expects positive rent growth but below long-term average growth rates: “Although the multifamily market is facing stress from high supply, high interest rates and moderating performance, over the longer term it will remain a favored asset class due to the lack of alternative housing options, continued economic strength and demographic tailwinds.” Rent growth is expected into 2025 due to healthy demand, decreased supply levels, and more favorable economic conditions. A recent RealPage publication projected 2025 rent growth in the range of 2% to more than 3% in the top 50 U.S. markets.
Source: GREA Research, Freddie Mac 2024 Midyear Multifamily Outlook, July 2024, RealPage Analytics, CoStar
Employment
Total nonfarm payroll employment increased by 114,00 positions in July 2024, below the average monthly gain of 215,000 over the past year. The industries of health care, construction, government, and transportation and warehousing had the largest gains with 55,000, 25,000, 17,000, and 14,000 added positions, respectively. Employment in the information industry sector declined by 20,000 but has changed little over the year. The average hourly earnings for all employees increased 0.2% to $35.07. Average hourly earnings have increased by 3.6% year-over-year.
The national unemployment rate increased by 0.2 percentage points to 4.3% in July, and the number of unemployed people increased by 352,000 to 7.2 million. These measures are higher than a year earlier, when the unemployment rate was 3.5%, and the number of unemployed people was 5.9 million. Among those not in the labor force who wanted a job, the number of people marginally attached to the labor force, at 1.6 million, was little changed in July.
| National Employment (Thousands) | July 2024 | % ∆ from June 2023 | Net Gain |
|---|---|---|---|
| Total Non-farm | 158,445 | 1.6% | 2,464 |
| Mining and Logging | 640 | -1.8% | -12 |
| Construction | 8,484 | 3.0% | 244 |
| Manufacturing | 13,010 | 0.1% | 13 |
| Trade, Transportation, and Utilities | 29,001 | 0.8% | 231 |
| Information | 3,021 | -0.8% | -25 |
| Financial Activities | 9,314 | 0.2% | 23 |
| Professional and Business Services | 23,087 | 0.6% | 136 |
| Private Education and Health Services | 26,083 | 3.9% | 988 |
| Leisure and Hospitality | 17,678 | 1.5% | 256 |
| Other Services | 5,990 | 1.4% | 83 |
| Government | 22,137 | 2.4% | 527 |
Source: Bureau of Labor Statistics, The Employment Situation July 2024
Rental Market
Multifamily demand rebounded in the first half of 2024 after the market reached an infection point towards the end of 2022. In 2023, the national average rent was 23.5% higher than at the beginning of the pandemic in March 2020, and rent growth remained positive through Q3 2023 in almost all large metropolitan areas. Since the first quarter of 2022, overall rent growth has slowed significantly from 10.2% to just under 1% in May 2024. CoStar reported rent growth acceleration for the first time since 2021, with projected growth expanding from 1.1% currently to 2.7% at the end of this year. Year-over-year rent growth is forecast to remain in positive territory in 2025 with growth projections between 2% and more than 3% in the top 50 U.S. markets.
Demand outpaced supply In the first half of 2024 in six major metro areas, and all six markets reported occupancy rates above the national rate: San Francisco, East Bay, Louisville, Norfolk, San Jose, and Orange County. The national occupancy rate stands at 92.2%. Occupancy decreases are projected to slow the by end of 2024 and coincide with the steady readjusting of household formations as renter affordability becomes more tangible, especially in the mid-tier segment. With excess supply starting to quell, the multifamily market is forecasted to enter a phase of stabilization by the end of the year and into 2025.
Median Monthly
Mortgage Payment
Average Monthly
Rent (YTD)
Source: CoStar, RealPage Analytics
Average Rent / Vacancy
Asking Rent / Bedroom
Multifamily Construction
Multifamily demand rebounded in the first half of 2024 as consumer confidence strengthened. Deliveries are highly concentrated in the fastest-growing markets, particularly in the Sunbelt states. The inflationary effects on construction lending have constrained some developers from moving forward on proposed projects scheduled in the second half of 2024 and the first half of 2025, thereby aiding in higher absorption levels. National construction activity tapered to 864,000 units by the end of May 2024, down from a peak of 1.17 units under development in Q1 2023. National deliveries are projected to total 533,000 units for 2024, a 9.0% decrease from the 40-year high of 588,000 units in 2023. Forecasts indicate that deliveries will further decrease to 361,000 units in 2025. Meanwhile, overall absorption is quickening pace, a positive indicator that multifamily market conditions should begin to stabilize and balance by the end of the year and into 2025.
Source: CoStar
Multifamily Completions
Past 12 Months
Single Family
Permits
Multifamily Permits
(5+ Units)
Median Single
Family Price
Completions / Net Absorption
Units by Metro Delivering in 2024 (Top 40)
Units Under
Construction (Q3 '24)
12 Month
Delivered Units
| Market | Units Under Construction | % of Total UC | Units UC Delivering in Next 12 Months |
|---|---|---|---|
| New York | 64,084 | 4.1% | 22,095 |
| Dallas-Fort Worth | 44,750 | 5.1% | 39,258 |
| Phoenix | 31,785 | 8.1% | 20,352 |
| Austin | 31,511 | 10.4% | 26,982 |
| Atlanta | 26,664 | 5.1% | 24,278 |
| Charlotte | 26,519 | 11.8% | 15,319 |
| Miami | 24,616 | 12.7% | 7,539 |
| Washington | 23,460 | 4.1% | 15,834 |
| Los Angeles | 22,324 | 2.1% | 8,811 |
| Denver | 20,412 | 6.7% | 16,384 |
| Seattle | 20,368 | 5.2% | 12,847 |
| Houston | 20,098 | 2.8% | 23,953 |
| Boston | 17,080 | 6.2% | 8,666 |
| Orlando | 15,898 | 7.1% | 13,789 |
| Nashville | 14,673 | 8.5% | 11,672 |
| Philadelphia | 13,735 | 3.8% | 13,645 |
| San Antonio | 13,278 | 6.0% | 8,981 |
| Tampa | 13,177 | 5.7% | 10,884 |
| Nothern New Jersey | 12,265 | 7.3% | 5,969 |
| Minneapolis | 10,179 | 3.6% | 12,125 |
| Fort Lauderdale | 10,145 | 7.3% | 4,647 |
| Raleigh | 9,705 | 7.5% | 9,289 |
| Columbus | 8,642 | 4.0% | 6,392 |
| Inland Empire | 8,218 | 4.7% | 3,023 |
| San Jose | 7,964 | 5.0% | 1,598 |
| Orange County | 7,837 | 3.0% | 1,526 |
| San Diego | 7,680 | 2.7% | 5,019 |
| Chicago | 7,520 | 1.3% | 9,961 |
| Durham | 6,918 | 11.3% | 3,106 |
| Kansas City | 6,757 | 3.8% | 4,450 |
| Salt Lake City | 6,482 | 6.8% | 4,889 |
| Portland | 6,259 | 2.7% | 6,089 |
| Richmond | 6,105 | 5.9% | 3,420 |
| Jacksonville | 5,922 | 4.9% | 8,232 |
| Indianapolis | 5,472 | 3.2% | 6,712 |
| Charleston | 5,139 | 7.3% | 3,620 |
| Las Vegas | 5,059 | 2.7% | 5,954 |
| Sarasota | 4,957 | 11.4% | 3,670 |
| Huntsville | 4,660 | 10.4% | 6,483 |
| Cincinnati | 4,639 | 3.3% | 3,633 |
Multifamily Sales
After the unprecedented surge of multifamily traction activity throughout the nation in 2021 and 2022 that totaled $493 billion annually, the economic challenges of recent years have had a direct effect on multifamily fundamentals and transaction volume. The luxury segment has reduced approximately 25% from its peak in the first quarter of 2022, with mid-tier assets experiencing sharper declines in the upper 20% range. B-Class properties are now frequently priced with capitalization rates in the mid-to-high-5% range, and C-Class assets often trade with a cap rate above 6%.
Market participants, especially institutional investors and REITs, have mostly remained on the sidelines since late 2022, holding for more favorable lending conditions including interest rate cuts. Delinquency rates remain relatively low compared to the office, retail, and hospitality commercial sectors. The multifamily sector has a modest increase in loan maturities with $257 billion and $213 billion due in 2024 and 2025, respectively. Investors who acquired property before the pandemic-related pricing surge are well-poised to navigate lending challenges.
Source: CoStar
YTD Transaction
Volume
YoY Change
Price Per Unit
Annual Price Change
Average Sales PPU / Cap Rate
The tightening of lending standards, the rise of interest-driven capitalization rates, and escalated insurance costs all have contributed to the deceleration of transaction volume and price growth.
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Todd Franks
Chairman / Founding Partner
Jordon Emmott
Founding Partner
Shimon Shkury
President & Founder
Cary Belovicz
Founding Partner
Ken Wellar
Founding Partner
Greg Frick
Founding Partner