© 2017 Fannie Mae. Trademarks of Fannie Mae. 6.16.2017 1 of 6

Multifamily Market Commentary – June 2017

Multifamily Supply and Demand Varies by Metro

Across the country, there are more than 630,000 new multifamily units currently underway with more than 400,000 of 

those units expected to complete and come online this year. That is in addition to the nearly 900,000 multifamily units 

delivered between 2014 and 2016. These totals are for multifamily rental units only; there are fewer than 84,000 

condominium units in total underway, with only about 53,000 condo units expected this year. 

And while this sounds like a lot of new units, in fact, at a national level, the potential demand for new multifamily units 

likely outstrips the current supply. At a national level, the amount of new multifamily units being added to the existing 

stock is not unreasonable. Job growth is expected to be about 1.6 percent this year, according to Moody’s Analytics, which 

would be an estimated addition of 2.3 million new jobs. Based on that amount of job growth, theoretically multifamily 

rental demand could be in the range of about 460,000 units. Unfortunately, much of this potential demand – and supply 

– varies greatly from metro to metro. 

Moderating Job Growth 

As seen in the chart below, positive job growth is expected in most of the nation’s major metros over the next two years. 

Job growth over the past seven years is bringing the nation to near full employment, as reflected in the May 2017 

unemployment rate of just 4.3 percent. So, it isn’t surprising that slower job growth is expected in most metros over the 

next two years. 

Some of the metros with the best anticipated job growth are also those that suffered some of the biggest job losses during 

the Great Recession—notably Orlando, Las Vegas, and Phoenix. Houston appears poised for improved job growth, 

but much of that projection is based on rising energy prices. With oil prices hovering in the sub-$50 per barrel range, this

forecast may be optimistic.

Job growth projections in some of the nation’s most expensive rental housing metros, such as San Francisco, San Jose, 

New York, and Boston, are expected to slow down quite significantly. Much of this anticipated decrease is likely due to 

the slowing of the high-tech industry, which had been fueling job creation in many of these metros, especially on the West 

Coast.

Construction Pipeline

0

20

40

60

80

100

120

Thousands

Apartments Condos

Source: Dodge Data & Analytics, May 2017 

NOTE: Pipeline data is not an actual forecast of activity, it is a monitor of activity reported to date. As more projects are planned and 

tracked, figures in future periods might go up. 
© 2017 Fannie Mae. Trademarks of Fannie Mae. 6.16.2017 2 of 6

New Supply Concentrated in a Handful of Metros 

As seen in the chart below, only 12 metros have more than 20,000 units that are completed or underway since 2016. This 

new supply is not evenly distributed throughout these metros and instead is concentrated in a limited number of 

submarkets. Even in the New York metro, about 43 percent of its nearly 86,000 multifamily units under construction are 

located in just two boroughs: Brooklyn and Queens. In fact, with more than 20,000 multifamily rental units underway, 

Brooklyn has more units underway than Manhattan, which has about 18,000 units underway. As a result, concessions 

currently are at just -2.0 percent for the greater New York metro according to Axiometrics, but above -8.3 percent for both 

Manhattan and Brooklyn, which is more than a month’s free rent.

At nearly 35,000 units, Washington, DC has the second-highest level of new multifamily rental supply underway. The 

bulk of the DC metro’s new multifamily construction is located within the District itself, with more than 16,000 units 

underway. The most impacted District submarkets include Anacostia, Northeast, Capitol Hill, Logan Circle, the Southwest 

Waterfront, Brightwood, and Mt. Pleasant. The Northern Virginia submarkets have more than 8,500 multifamily rental 

units underway, located primarily in Tysons Corner, Rosslyn, Ballston, Shirlington, and Old Town Alexandria. 

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%

Detroit

New York

Philadelphia

Chicago

San Jose

Boston

San Francisco

Los Angeles

Washington

**United States**

Atlanta

Charlotte

Miami

Seattle

Houston

Dallas

Austin

Phoenix

Las Vegas

Orlando

Next 2 Years

Prior 2 Years

Change in Employment (CAGR) – Select Metros 

Source: Moody’s Analytics, 1Q2017
© 2017 Fannie Mae. Trademarks of Fannie Mae. 6.16.2017 3 of 6

Developers Focused on High-Cost Metros 

Why are developers building so many new multifamily units primarily in higher-cost metros? The leading reason is rising 

construction costs. According to the Engineering News-Record’s Construction Cost Index, overall construction costs have 

risen about 2.6 percent annually on average over the past five years. The cost of most building materials doesn’t really 

fluctuate regardless of the location of the construction project. Therefore, many developers have been focusing on those 

metros that boast a trifecta of solid job growth, positive demographic trends, and above-average asking rents.

This helps explain why metros such as Indianapolis or Cincinnati – both of which have had positive job growth over the 

past few years – do not have elevated levels of new multifamily supply underway. For example, Cincinnati had job growth 

of 1.8 percent in 2016 and is expected to have at least 1.6 percent job growth this year. And while about 2,900 units are 

due to complete and come online in 2017, there is potential demand for about 3,800 multifamily rental units this year 

alone. But Cincinnati’s average asking rent is estimated at just $850, as of the fourth quarter of 2016. That rent level is not 

much of an incentive for developers to build new multifamily projects in Cincinnati if there isn’t much of a project cost 

differential between it and a higher asking-rent metro, such as Seattle. 

Multifamily Apartment Units Underway – Select Metros

 -

 20

 40

 60

 80

 100

 120

Thousands

Beyond

2018

2017

2016

Source: Dodge Data & Analytics, April 2017 – Metros with 4,000 or more units underway or completed.

NOTE: Pipeline data is not an actual forecast of activity, it is a monitor of activity reported on to date. As more projects are planned 

and tracked, figures in future periods might go up. 
© 2017 Fannie Mae. Trademarks of Fannie Mae. 6.16.2017 4 of 6

A Variety of Oversupplied Metros

As seen in the table to the right and highlighted in yellow, there are 

some metros that are considered oversupplied over the next 12 to 

24 months, based on projected job growth. Some of the larger and 

higher-cost metros include New York, Washington, DC, and 

Miami, but even smaller, less expensive rental metros have not 

been spared. These include San Antonio, Nashville, and 

Charlotte.

Portland is one example of a smaller metro that has been 

attracting residents and investment. Expansion of the high-tech 

sector here has helped boost much of Portland’s job growth, 

representing nearly 8 percent of the employment base. 

While jobs in this sector tend to pay well, it can also be quite 

volatile, especially since the metro’s largest employer is Intel, with 

more than 17,000 local employees. As a result of the influx of 

younger, well-educated, and well-paid residents, developers have 

focused on catering to this particular Millennial cohort, thereby 

creating too much expensive multifamily development in too few 

submarkets. About 70 percent of the units underway are Class A 

units but are located in just three submarkets: Northwest, 

Northeast, and Beaverton.

High-Tech Metros Equals High Levels of Supply

Other oversupplied metros include high-tech-centric metros such 

as Austin, Seattle, and Denver. In Austin, nearly one-tenth of 

jobs are in the high-tech sector, particularly in semiconductor and 

computer manufacturing. Some of the metro’s largest employers 

include Google, Apple, Facebook, IBM, and Samsung. This has led 

to an abundance of new multifamily supply geared toward 

Millennials who want to work and live downtown. 

As a result, Austin’s apartment market is likely in for some volatility 

as some of the new jobs expected over the next few years may not 

come from the high-tech sector nor pay enough to support Austin’s 

escalating asking-rent levels.

Undersupplied Might be an Overstatement

It is important to remember that estimating job growth and 

potential multifamily demand is just that: an estimate. In some 

cases, it is also an expectation that all of a metro’s economic drivers 

will coalesce at the same time. This can result in a metro appearing 

to be undersupplied but is nevertheless experiencing increasing 

concessions coupled with moderating or even negative rent growth. 

Houston is one such example. Although the metro could produce 

enough jobs to create demand for 29,000 multifamily rental units, 

there is already too much supply resulting from nearly stagnant job 

growth over the past few years, leading to a current concession rate 

of 3.0 percent—about triple the national average. In addition, much 

of that projected job growth is dependent upon an expectation of 

rising oil prices over the next two years.

Expected Supply and Potential Demand 

of New Multifamily Units

Source: Dodge Data & Analytics and Moody’s Analytics

Note: Supply equals total number of apartments units completed in 

2017 and 2018 per Dodge Pipeline. Potential Demand is estimated 

by factoring in both the amount of new supply and the total number 

of new jobs expected in the metro in 2017 and 2018, per Moody’s 

Analytics.
© 2017 Fannie Mae. Trademarks of Fannie Mae. 6.16.2017 5 of 6

Positive Job Growth Encouraged Too Much 

Supply

There are a number of metros that are expected to 

have above-average job growth between 2016 and 

2018, as seen in the table to the right. Unfortunately, 

that projected job growth encouraged developers to 

start building too many units in too few places.

One of the more startling examples of this 

supply/demand imbalance is Nashville. Nashville’s 

multifamily rental sector has had robust deliveries of 

new units in the past several years, riding a wave of 

strong job and population growth, as well as an 

impetus to replace multifamily units lost in the floods 

of 2010. Unfortunately, it has simply been too much of 

a good thing, with more than 20,000 units completed 

since 2012 and another 13,000 units underway. As a 

result, modest rent growth, rising concessions, and 

increasing vacancy rates are expected in the near term.

Some Metros Need More Supply

Orlando and Phoenix are both poised once again to 

see some of the best job growth in the nation this year, 

as seen in the table to the right, due primarily to 

growth in the professional services, healthcare, and 

tourism sectors. Yet both metros are likely to be 

under-supplied. Orlando is expected to see job growth 

of nearly 7 percent between 2016 and 2018 but supply 

will likely fall short of demand by more than 4,500 

units. Phoenix is also likely undersupplied. Its job 

growth should produce demand for more than 20,000 

multifamily units, but only about half that amount is 

underway.

Brighter Outlook Longer-Term

It is important to keep in mind that this mismatch of 

supply and demand in many metros is expected to be 

short-lived, lasting only over the next 12 to 24 months. 

After that time, it is expected that the multifamily 

sector’s underlying fundamentals in these metros will 

at least stabilize, if not improve, as this new wave of 

supply finally ebbs, allowing anticipated positive job 

growth and demographic trends to create more 

normalized—and even increasing—multifamily rental 

demand. 

Market MF Inventory T otal Jobs Difference

Nashville 9.6% 4.2% -5.4%

Denver 6.1% 3.4% -2.7 %

Kansas City 5.4% 2.8% -2.6%

Charlotte 6.0% 3.8% -2.3%

San Antonio 6.8% 4.5% -2.2%

San Jose 3.8% 1.7 % -2.1%

Washington 4.6% 2.9% -1.7 %

Austin 6.7 % 5.1% -1.6%

Seattle 5.6% 4.1% -1.5%

Boston 3.9% 2.7 % -1.2%

New Y ork 2.9% 1.8% -1.1%

Portland 4.9% 4.1% -0.8%

Baltimore 2.9% 2.3% -0.6%

Philadelphia 2.7 % 2.2% -0.5%

Columbus 3.9% 3.5% -0.4%

Minneapolis 3.0% 2.6% -0.4%

Indianapolis 3.3% 3.0% -0.3%

Virginia Beach 2.4% 2.2% -0.3%

San Francisco 2.7 % 2.7 % -0.1%

Honolulu 1.6% 1.6% 0.0%

Los Angeles 2.4% 2.4% 0.0%

Milwaukee 2.4% 2.5% 0.1%

Atlanta 4.0% 4.3% 0.2%

St. Louis 1.9% 2.2% 0.3%

Pittsburgh 2.2% 2.7 % 0.5%

Chicago 1.6% 2.2% 0.6%

Sacramento 1.7 % 2.3% 0.7 %

San Diego 1.8% 2.6% 0.8%

Dallas 4.7 % 5.6% 0.9%

Miami 2.8% 4.1% 1.2%

Cleveland 1.2% 2.6% 1.4%

Orlando 5.3% 6.8% 1.5%

Detroit 0.9% 2.5% 1.6%

Tampa 2.5% 4.2% 1.7 %

Riverside 0.8% 2.6% 1.8%

Cincinnati 1.4% 3.4% 2.1%

Phoenix 3.0% 5.1% 2.1%

Houston 2.2% 4.9% 2.7 %

Las Vegas 2.2% 5.6% 3.4%

% Increase: 2016 vs. 2018 

Expected Change in Jobs and Multifamily Units

Source: Dodge Data & Analytics and Moody’s Analytics
© 2017 Fannie Mae. Trademarks of Fannie Mae. 6.16.2017 6 of 6

Kim Betancourt

Director of Economics

Tim Komosa

Economist Manager

Multifamily Economics and Market Research

June 2017

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Multifamily Economics and Market Research 

Group (MRG) included in these materials should not be construed as indicating Fannie Mae's business prospects or 

expected results, are based on a number assumptions, and are subject to change without notice. How this information 

affects Fannie Mae will depend on many factors. Although the MRG bases its opinions, analyses, estimates, forecasts 

and other views on information it considers reliable, it does not guarantee that the information provided in these 

materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information 

underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other 

views published by the MRG represent the views of that group as of the date indicated and do not necessarily represent 

the views of Fannie Mae or its management.