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Multifamily Economic and Market Commentary

JANUARY 2023

2023 Multifamily Market Outlook: Turbulence Ahead

Demand for multifamily plummeted during the fourth quarter of 2022, after having been at above-average levels 

earlier in the year. It appears that rental demand has been negatively impacted by persistent inflation pressures, 

diminished savings levels of many households, and ongoing recession expectations. Indeed, we are still projecting a 

moderate recession for the first half of 2023, and, as a result, we are expecting lower-than-normal rent growth this 

year along with a higher national vacancy rate. However, due to elevated mortgage rates and the overall national 

shortage of housing, we believe that many renters will not move into homeownership in the near term, keeping 

multifamily fundamentals subdued but somewhat stable over the second half of the year.

That said, the national multifamily vacancy rate is expected to slowly rise in 2023, from an estimated 5.5 percent as of 

fourth quarter 2022, to an estimated 6.0 percent by year-end 2023, as illustrated in the chart below, and then begin to 

stabilize at 6.25 percent further out in the forecast in 2024. The pace of absorption is expected to slow significantly 

this year due to the elevated number of new units delivering over the next 12 to 18 months. In addition, we expect 

that more units will offer concessions, and that those concession levels will increase slightly during the first half of 

the year, as rental demand remains lackluster. 

Source: Fannie Mae MF ESR p = preliminary * Projected

Demand for multifamily rental units was robust during much of 2022 but then dissipated during the last three 

months of the year. According to data from RealPage, multifamily demand was estimated at 661,910 units at the 

end of 2021, compared to an estimated 303,031 units in 2020. But by year-end 2022, demand had turned negative, 

at -103,485 units. In addition, RealPage is anticipating that demand will remain negative in early 2023, with an 

estimated -80,049 units, but then end 2023 with a positive 492,862 units of multifamily demand. 

Demand Expected to Slow in 2023

Annualized Multifamily Rent and Vacancy – Estimated and Projected

3.0%

5.0%

7.0%

9.0%

$925

$1,025

$1,125

$1,225

$1,325

$1,425

$1,525

$1,625

Rent Level Vacancy Rate
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Rent Growth Expected to Start the Year Negative

We believe that national rent growth was positive in 2022, despite turning negative at the end of the year, 

reaching an estimated 4.75 percent in 2022, down from an estimated 10 percent in 2021, after having ended 

2020 at an estimated negative 0.75 percent. We expect rent growth to start the year negative, but then turn 

slightly positive to 1.5 percent by year end. 

Multifamily Economic and Market Commentary

Vacancy Expected to Increase

We expect the national multifamily vacancy rate to rise in 2023, primarily due to the amount of new supply 

expected to deliver over the next 12-18 months this year, just as the economy likely enters a recession and job 

growth turns negative. Much of this new supply consists of more expensive, class A units in many places, and 

with elevated mortgage rates and fairly high single-family home prices in many locations across the country, 

we believe it may result in keeping some renters renting for awhile longer. Nevertheless, we expect that the 

amount of new supply completing over the next 12 months will push the national vacancy rate up to 6.0 

percent in 2023. It is important to note that remaining at this level is a return to the most recent estimated 

vacancy peak of 6.0 percent that occurred in first quarter of 2021, as seen in the chart below, and is only 

slightly above the long-term average of 5.8 percent from 2005 through 2022. 

Estimated National Vacancy and Rent Trends through Fourth Quarter 2022 

Source: Fannie Mae Multifamily ESR Note: p = preliminary

3.0%

5.0%

7.0%

9.0%

$925

$1,025

$1,125

$1,225

$1,325

$1,425

$1,525

$1,625

Rent Level Vacancy Rate
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0%

1%

2%

3%

4%

5%

6%

7%

8%

A

B

C

Multifamily Economic and Market Commentary

Demand for all classes of multifamily units remained strong in early 2022 but began to ease later in the year, as 

illustrated below. According to data from RealPage, Inc., as of fourth quarter 2022, year-over-year effective rent 

growth for stabilized class A and B units was a still remarkable 8.5 percent and 9.0 percent, respectively, but both 

classes saw double digit annual growth in the prior three quarters of the year. Effective rent growth for stabilized 

class C remained high throughout the year, and class C ended the year with the highest effective rent growth at 12.4 

percent. We believe that the slowing in rent growth across all classes later in the year was the result of slightly 

diminishing demand as the national economy eased, and a general easing in market conditions after several 

consecutive quarters of unsustainable rent growth.

National Multifamily Concession Rate by Class

Concession Rates 

5%

10%

15%

20%

25%

30%

A

B

C

Percent Of Units Offering Concessions

Source: RealPage, Inc.

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As effective rent growth experienced easing later in 2022, so did the industry see a rise in the number of properties 

offering concessions, as seen in the charts below. As of fourth quarter 2022, an estimated 12.9 percent of class A 

and 9.5 percent of class C properties were offering concessions, rising from mid-year levels of 10.4 percent and 5.3 

percent, respectively. While concession levels fell slightly during the year and remained below one month’s free 

rent on average, they continue to be above recent trends, as seen in the chart below left. We expect that both the 

value of concession and the number or properties offering them will be on the rise in 2023. 

-10%

-5%

0%

5%

10%

15%

20%

% CHANGE FROM PRIOR YEAR

A B C

Source: RealPage, Inc. 

National Effective Rent Growth by Class

All Classes Experienced Declining Rent Growth in Late 2022 

Concessions Heading Up 
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Multifamily Economic and Market Commentary

New Multifamily Supply Expected to Peak in 2023 

According to preliminary data from Dodge Data & Analytics Supply Track, which distinguishes between 

multifamily properties consisting of apartment and condominium units, more than 469,000 apartment units were 

completed in 2022, up notably from 2021’s 396,000 units and 2020’s 404,000 – the most recent peak year for new 

deliveries. Although Dodge Data & Analytics is currently tracking nearly 783,000 units slated for completion in 

2023, we believe it is very unlikely that all those units will be completed before year end. 

According to the National Multifamily Housing Council’s Construction Survey, as of December 2022, 84 percent of 

survey respondents stated that they were experiencing construction delays, which was the lowest level of the 

year and continued a declining trend from the second quarter. Delays in permitting and starts also eased as the 

year went on, though delays in starts remains relatively high at 79 percent. In addition, the developers surveyed 

indicated that labor and material shortages, which were a significant concern in 2021, both saw availability 

improvement in 2022. As a result of this apparent improvement in construction operations, we believe there will 

be a modest increase in the level of new units completed in 2023, though a recession could impact this. 

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0

50

100

150

200

250

THOUSANDS OF UNITS

Apartments Condos

Multifamily New Construction

Source: Dodge Data & Analytics Supply Track, December 2022

* Anticipated completion date.

NOTE: Supply Track 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. 
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Multifamily Economic and Market Commentary

Softening Multifamily Demand Expected in 2023

At a national level, we believe that there will continue to be a supply/demand imbalance this year, based on the 

amount of new multifamily units expected to come online compared to the anticipated increase in job growth. 

Although it is unlikely that all 783,000 new units slated for completion will be delivered by year-end 2023, the 

anticipated economic recession and the expectation of higher unemployment is unlikely to produce enough 

demand to keep up with the wave of new deliveries.

Year-over-year job growth is expected to be -1.1 percent by the end of 2023, according to Fannie Mae’s latest 

economic forecast, resulting in an estimated loss of 2.0 million jobs, meaning that multifamily rental demand 

would be weak, just as more than 783,000 new units are expected to complete and deliver. 

Much of this new supply consists of more expensive class A units and is primarily concentrated in about 15 

metros, as seen in the chart below. In addition, several of the impacted submarkets are some of the most 

expensive in the country, including New York, Washington, D.C., Seattle, and Los Angeles. 

Although Moody’s Analytics is expecting some metros to see positive job growth in 2023, such as Austin, Dallas, 

Orlando, and Raleigh, the amount of elevated supply might still outstrip demand. 

 -

 20

 40

 60

 80

 100

 120

 140

 160

Thousands

Beyond 2024

2023 2022

Source: Dodge Data & Analytics, January 2023– Metros with 5,000 or more units underway or completed.

NOTE: Supply Track 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. 

Year of Completion/Expected Completion

Multifamily Apartment Units Underway – Select Metros

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Multifamily Economic and Market Commentary

Although at a national level job growth is expected to turn negative in 2023, there are some metros that are expected 

to see positive job growth, as illustrated in the two charts below. Some Florida metros, such as Jacksonville, Miami, 

and Tampa are all expected to have job growth of between 1.4 percent and 1.5 percent; some of the best in the nation. 

However, we believe it is not likely to be enough to keep up with all the new supply expected. For example, 

Jacksonville could have enough job growth to produce demand for 2,268 multifamily units, but new supply expected 

to deliver in 2023 could be more than 9,300 units. The Miami metro is expecting 16,534 new multifamily units in 2023, 

but based on Moody’s Analytics’ anticipated job growth rate of 1.5 percent, the metro would likely only have demand 

for about 4,700 units, leaving a potential excess of more than 11,000 units. Tampa is expecting 11,324 multifamily 

units to deliver this year, but with Moody’s Analytics expecting a job growth rate of just 1.4 percent, the metro could 

have excess supply of more than 7,100 new multifamily units. Even Orlando, which is one of the metros with the 

highest expectation of job growth at more than 2.2 percent in 2023, is still not expected to produce enough jobs to 

meet the demand for the more than 22,500 multifamily units expected in 2023, resulting in a likely oversupply of more 

than 15,000 units. 

Positive Job Growth Will Not Be Enough in Some Metros...

Some other metros, especially ones that have seen recent explosive job and population growth, such as Austin, 

Phoenix, Dallas, and Salt Lake City, may also not see enough job growth in 2023 to absorb the wave of new supply 

coming. Some of the Texas metros, such as Austin, for example, will likely have good job growth of about 1.7 percent, 

according to Moody’s Analytics, which should produce demand for more than 7,000 multifamily units. Unfortunately, 

the metro is expecting more than 31,000 units to deliver in 2023, leaving a shortfall of more than 24,000 units of 

demand. Dallas is also under a cloud of excess new supply in 2023. Even with anticipated job growth of 1.5 percent, the 

metro is expected to only need 11,059 new multifamily units, yet it is slated to deliver more than 28,000 units in 2023, 

creating an excess of more than 17,000 new multifamily units.

Phoenix is another metro that has an excess number of multifamily units. Despite an anticipated job growth of nearly 

2.0 percent in 2023, producing possible demand for more than 10,000 multifamily units, the metro is on track to deliver 

nearly 18,000 multifamily units in 2023, creating a shortfall in demand of nearly 7,000 multifamily units.

Select Markets with Higher Expected 2023 

Employment Growth

0% 1% 2% 3%

Houston

Tampa

Dallas

Jacksonville

Miami

Salt Lake City

Austin

Raleigh

New Orleans

Orlando

Select Markets with Lower Expected 2023 

Employment Growth

-1% 0% 1%

Kansas City, MO

St. Louis, MO

Omaha

Hartford

Providence

Chicago

Cleveland

Virginia Beach

Birmingham

Milwaukee

Source: Moody’s Analytics
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We maintain a cautious outlook for the multifamily sector in 2023. We expect the multifamily sector to see a decline 

in demand during the first half of the year, resulting in negative rent growth for at least the first quarter of 2023, with 

a return to slightly increased demand during the second half. After two years of above-average rent increases, a 

decline in rent growth is a welcome trend for many renters but is not expected to contribute much to increased 

affordability, at least at a national level. In some metros, especially those with a large amount of supply expected to 

come online during the year, it could push rents down and concessions up quite significantly, but that is likely to be 

on a localized, submarket level. 

With interest rates expected to remain elevated, coupled with a softening in rental housing demand, we expect 

multifamily origination volume levels will decrease in 2023 compared to 2022. As of January 2023, the Mortgage 

Bankers’ Association estimates that multifamily originations volume will be $439 billion in 2022 and $393 billion in 

2023, but that is subject to change. Based on current trends, our estimated annual multifamily originations are in 

the same general range, although slightly higher: $430 -$450 billion in 2022 and $400 billion in 2023. 

It is important to note that whether the expected recession occurs earlier in the year or later, we expect the 

multifamily housing market to experience a softening in demand in 2023 and extending into 2024.

While there were several signs of a cooldown of multifamily fundamentals later in 2022, sales volume reached the 

highest level ever seen year-to-date through the third quarter. We believe the elevated activity seen in the beginning 

of the year was driven in large part by investors rushing to get into the market before interest rate hikes made 

financing too difficult or expensive. But even with a slowdown in activity, prices continued to increase.

Considering the signs of easing that are already appearing, it would not surprise us to see multifamily property sales 

approach $275 billion for the year. However, considering many of the performance indicators of multifamily 

performance are leading indicators, we expect sales volume to continue to taper off in 2023 and likely remain below 

$200 billion for the year. 

Multifamily cap rates remained low in 2022, at a national estimated level of 4.7% through the third quarter. However, 

we believe multifamily cap rates are likely to increase above 5.0% by early 2023 as investor demand further 

moderates and the 10-year Treasury rises. 

Multifamily Economic and Market Commentary

2023 Multifamily Outlook: Turbulence Ahead

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Treasury Interest Rates and Multifamily Capitalization Rates

Source: Federal Reserve, Selected Interest Rates H.15, per Moody’s Analytics, Real Capital Analytics www.rcanalytics.com

Multifamily Property Sales Expected to Moderate in 2023

0.0%

2.0%

4.0%

6.0%

8.0%

10-Year Treasury Cap Rates
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Multifamily Economic and Market Commentary

Kim Betancourt, CRE

Vice President, Multifamily Economics and Strategic Research

Tim Komosa

Senior Manager, Multifamily Economics and Strategic Research

Multifamily Economics and Strategic Research

January 2023

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic and Strategic Research (ESR) Group included in 

these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number 

of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. 

Although the ESR Group 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 ESR Group represent the views of that group as of the date 

indicated and do not necessarily represent the views of Fannie Mae or its management.

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