Multifamily Housing Outlook: Current Calm, But Change is on the Horizon - Stay Prepared
In recent months, the multifamily housing market has experienced a surprising period of stability. We’re diving into the latest trends, the factors driving them, and what the future might hold for both renters and property owners.
After several years of notable fluctuations, the multifamily rental market has leveled out during the first part of 2024. Rental price growth, which surged to an unprecedented 16% in 2022, has now balanced between 3.4% and 3.5% over the last several months. Similarly, the rental vacancy rate has remained constant at 6.6%, an unusually steady streak in the historical data.
This moment of stability can be attributed to a mix of factors. The multifamily sector is benefiting from an influx of newly built rental units, just as demand for apartments has surged due to population growth, higher housing prices, and increased immigration. However, these favorable conditions aren’t expected to last indefinitely.
New data suggests that fewer multifamily units are under construction now compared to earlier in the year. With a significant drop in construction activity, the supply of new rentals is likely to decrease in the near future. On the demand side, predicting changes is trickier, but it’s anticipated that demand may ease as interest rates soften, housing becomes more affordable, and more renters transition to homeownership. Immigration, a key driver of rental demand, may also slow down after reaching its peak last year. The future of rental pricing and availability will largely depend on which shifts more dramatically—supply or demand.
Another factor contributing to the current stability is the slowdown in renter mobility. According to data from the US Census Bureau, the number of people moving out of rental units has remained stable for three years in a row. This follows a significant reduction in renter turnover from 2011 to 2021. The median time that units sit vacant has also held steady, staying close to the average of the past five years.
This period of balance, while short-lived, has benefits for both renters and property owners. With supply and demand aligning, renters have more options and flexibility, while property owners enjoy more consistent rental income. This synchronicity helps property managers anticipate vacancy periods and plan more effectively.
However, several forces driving the current equilibrium are beginning to shift. The slowdown in first-time homebuyer activity has contributed to fewer renters moving out, a trend that could reverse as home affordability improves. Mortgage rates remain high, and housing inventory remains low, but these factors could change in the coming years, leading to an uptick in renters purchasing homes.
Additionally, lingering effects from the pandemic continue to influence vacancy durations. The time it takes to transition between renters has increased since 2020, partially due to changes in how both renters and landlords manage move-ins and move-outs. As these pandemic-driven behaviors gradually fade, vacancy turnover times are likely to shrink, and the rental market may return to its previous pace.
Given these evolving trends, maintaining high levels of resident satisfaction is essential. As renter mobility begins to pick up again, retaining tenants will be more important than ever. Property managers and owners should focus on meeting renters’ needs and enhancing their experiences at every stage, from initial inquiry through move-out.
Staying informed about what renters want is critical in today’s competitive market. Access the latest insights on renter preferences to ensure your property remains ahead of the curve.