© 2019 Fannie Mae. Trademarks of Fannie Mae. 1 of 6

Multifamily Market Commentary – July 2019

Multifamily Supply and Demand Varies by Metropolitan Areas

While there may seem to be a lot of multifamily units under construction, at a national level the potential demand for new 

units is expected to be in balance with current supply underway. Unfortunately, much of this potential demand – and 

supply – is not evenly matched around the country; the match between supply and demand varies greatly between 

metropolitan areas. This means that a number of metropolitan areas could end up with an oversupply of newer, more 

expensive class A multifamily units over the next 18 to 24 months, which in turn, would negatively impact fundamentals, 

and not help offset the ongoing lack of affordable multifamily rental housing across the country. 

There are more than 630,000 new multifamily units currently underway, with more than 440,000 of those units expected 

to complete and come on line this year. That is in addition to the nearly 388,000 multifamily units delivered in 2018 

alone. These totals are for multifamily rental units only. By contrast, there are only about 61,000 condominium units 

underway, of which about 50,000 are expected to complete this year. Nevertheless, new deliveries are expected to ebb 

over the next 12 months, as seen in the chart below, which should give the market time to absorb these units. 

Job Growth Expected to Slow

Job growth is expected to be about 1.5 percent this year, according to Fannie Mae’s forecast, an estimated addition of more 

than 2.2 million new jobs. Based on that amount of job growth, multifamily rental demand could theoretically be in the 

range of about 450,000 units in 2019. But job growth – and multifamily demand – will vary by metropolitan area.

As seen in the Change in Employment Growth chart below, most of the nation’s major metropolitan areas are expecting 

positive job growth over the next two years. The economic expansion – and new job growth – over the past several years 

has brought the nation to near full employment, as reflected in the June 2019 unemployment rate of just 3.7 percent. As a 

result, it’s not surprising that most metropolitan areas are expecting positive but slower job growth over the next two years 

as the economy starts to slow down. 

Some of the metropolitan areas with the best anticipated job growth over the next 18 months include a number of the 

Texas metropolitan areas, such as Austin, Dallas, Houston, and even the smaller metropolitan area of El Paso. There is 

also robust job growth expected in metropolitan areas that suffered some of the biggest job losses during the Great 

Recession, notably Orlando, Jacksonville, Las Vegas, and Phoenix, all of which have been a bright spot for multifamily 

demand over the past two years.

By contrast, projected job growth for metropolitan areas with some of the nation’s most expensive rental housing, such as 

Los Angeles, San Francisco, San Jose, New York, and even Boston, has declined from previous expectations, just as new 

multifamily deliveries are expected to peak.

0

20

40

60

80

100

120

140

160

Thousands

Apartments Condos

Construction Pipeline

Source: Dodge Data & Analytics, June 2019

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. 
© 2019 Fannie Mae. Trademarks of Fannie Mae. 2 of 6

New Supply Concentrated in a Handful of Metropolitan Areas 

As seen in the Multifamily Apartment Units Underway chart, only about 12 metropolitan areas have more than 15,000 

units that have recently been completed or are currently under construction in 2019. Moreover, this new supply is not 

evenly distributed throughout these metropolitan areas and instead is concentrated in a limited number of submarkets. 

For instance, in the New York metropolitan area 45 percent of the nearly 57,000 multifamily units under construction is 

located in just two boroughs: Brooklyn and Queens. In fact, with more than an estimated 15,000 multifamily rental 

units under construction, Brooklyn has more units underway than Manhattan, which has fewer than 10,000 units 

underway. 

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

bulk of the DC metropolitan area’s new multifamily construction is now located outside of the District, with the Northern 

Virginia submarkets accounting for more than 15,000 units underway, including Rosslyn, Ballston, Tysons Corner, 

Fairfax, and Old Town. There are more than 13,000 units underway in the District proper. The most impacted District 

submarkets include Anacostia, Northeast, Capitol Hill, the Southwest Waterfront, Brightwood, Mt. Pleasant, and Fort 

Totten. 

Source: Moody’s Analytics, 4Q2018

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

Pittsburgh

Minneapolis

Baltimore

Chicago

Los Angeles

Atlanta

New York

**United States**

Boston

San Jose

San Francisco

San Antonio

Las Vegas

El Paso

Phoenix

Jacksonville

Raleigh

Houston

Dallas

Austin

Orlando

Next 2 Years Prior 2 Years

Change in Employment (CAGR) – Select Metropolitan areas 
© 2019 Fannie Mae. Trademarks of Fannie Mae. 3 of 6

High Levels of Supply in High Cost Metropolitan Areas 

Why are developers building so many new multifamily units primarily in higher-cost metropolitan areas? The leading 

reason is rising construction costs. According to data from RS Means, multifamily construction costs have risen 5.3 

percent annually on average from 2016 through 2018, and the cost of most building materials doesn’t fluctuate that much 

by location of the construction project. Therefore, many developers have stayed focused on those metropolitan areas that 

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

This helps explain why metropolitan areas such as St. Louis and Birmingham – 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, St. Louis

is expected to have job growth of 1.9 percent over the next 18 months, suggesting potential demand for more than 5,000 

multifamily units, yet only about 2,000 units are underway. More dramatically, Birmingham is in the midst of an 

economic expansion and is expecting 1.7 percent job growth between now and the end of 2020, creating potential demand 

for nearly 1,900 units, yet fewer than 920 units are underway.

But the average asking rent in both St. Louis and Birmingham is estimated at about $950, according to CoStar. That rent 

level is not much of an incentive for multifamily developers to break ground. That’s because there is not much of a project 

cost differential between lower cost metropolitan areas such as Birmingham and a higher-priced metropolitan area, such 

as Seattle. But there is a large differential in the amount of rent that can be commanded. With an average asking rent of 

$1,730 coupled with annualized rent growth of nearly 4.0 percent, it is easy to understand how Seattle now has more than 

21,000 units underway. 

A Number of Possibly Oversupplied Metropolitan Areas

As seen in the table below, most major metropolitan areas may be oversupplied over the next 12 to 24 months, based on 

projected job growth. Only a few, two of which are highlighted in yellow, will likely be undersupplied. Some of the larger 

and/or higher-cost metropolitan areas likely to face oversupply include New York, Washington, DC, Denver, 

Boston, Atlanta, Portland, and Miami, but even smaller and/or less expensive rental metropolitan areas have not 

been spared. These include Colorado Springs, Richmond, Kansas City, and even Detroit.

Expected Supply and Potential Demand of New 

Multifamily Units

Source: Dodge Data & Analytics, June 2019 – Metropolitan areas with 5,000 or more units underway or completed.

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. 

 -

 10

 20

 30

 40

 50

 60

 70

 80

 90

 100

Thousands

Beyond

2020

2019

2018

Multifamily Apartment Units Underway – Select Metropolitan Areas
© 2019 Fannie Mae. Trademarks of Fannie Mae. 4 of 6

While Dallas will also likely face over supply 

short-term, in the longer term it may actually be 

slightly under-supplied. That’s because Dallas, 

with a population of nearly 8 million, is expected to 

have some of the best job growth in the country over 

the next two years, at an estimated 4.6 percent. As a 

result, although there could be an oversupply of more 

than 5,600 units by the end of 2020, the metropolitan 

area could easily find itself facing a supply shortage of 

more than 3,500 units within 18 months. This even 

takes into account the possibility of national economic 

slowdown. 

Some High-Tech Metropolitan Areas 

Could Remain Oversupplied LongerTerm 

Other oversupplied metropolitan areas include hightech metropolitan areas such as Austin, Seattle, 

Denver, and Portland. While some of these 

metropolitan areas are expected to absorb their excess 

supply over the next three years, not all are likely to 

fare the same. 

Denver’s high-tech jobs account for 7.1 percent of the 

metropolitan area’s total employment but that also 

includes manufacturing jobs, which are highly cyclical 

and can be negatively impacted by changes in global 

trade. In addition, Denver has more Millennials and 

Gen Xers than the national average, which is a plus for 

the multifamily sector. But on the other hand, its net 

migration trends are less robust than would be 

expected for a metropolitan area of its size, which 

could negatively impact multifamily demand over the 

long-term. 

For example, Austin is a smaller metropolitan area 

with about 2.2 million people, yet its net migration last 

year totaled more than 37,000 people. By contrast, 

Denver’s net migration was 23,000 despite having a 

population of nearly 3 million people. In addition, 

Denver’s job growth is expected to sputter in 2021, 

declining to nearly zero, just as 6,000 multifamily units 

will have delivered the year before. More importantly, 

Moody’s is anticipating that Denver’s job growth will 

“...slow in high-skill, high-paying industries.” If that 

occurs, the multifamily sector could be negatively 

impacted and the potential for Denver to remain 

oversupplied could extend well past the next 24 months.

Metro Area (Units) Potential Demand

New York 57,331 37,328

Washington, DC 33,105 15,974

Dallas 29,782 24,174

Los Angeles 26,313 14,973

Boston 23,617 8,970

Seattle 22,500 13,897

Atlanta 20,224 7,660

Miami 17,910 7,262

Austin 17,879 9,897

Denver 17,521 6,097

Chicago 17,098 12,458

Orlando 16,031 12,115

Minneapolis 14,527 4,352

Houston 12,896 24,684

Oakland 12,530 5,480

Philadelphia 10,840 8,060

Phoenix 10,743 13,792

San Francisco 10,419 6,223

Charlotte 9,759 7,109

San Antonio 9,663 6,298

Portland 9,393 6,611

 

Source: Dodge Data & Analytics and Moody’s Analytics. 

Note: Supply equals total number of apartments units completed in 2019 

and 2020 per Dodge Supply Track. Potential Demand is estimated by 

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

expected in the metropolitan area in 2019 and 2020, per Moody’s Analytics.

Total New Units Expected
© 2019 Fannie Mae. Trademarks of Fannie Mae. 5 of 6

Some Metropolitan Areas Need More Supply

Houston, Phoenix, and Las Vegas are a few of the 

metropolitan areas that are expected to see some of the 

best job growth in the nation over the next two years. 

This is primarily due to growth in the professional 

services and education and healthcare sectors, and in 

the case of Las Vegas primarily the tourism sector. Yet, 

these metropolitan areas are likely to be 

undersupplied, especially over the short-term. 

While Houston’s reliance on the energy sector is still 

a primary driver of its economy, it also relies on the 

education and healthcare sectors as well as 

professional and business services sectors, thereby 

improving the metropolitan area’s industrial diversity. 

As a result, overall job growth has been above 2.0 

percent on average annually since 2018 and is expected 

to remain above the national average over the next 

several years. While that should produce demand for 

more than 24,000 multifamily units through 2020, 

only about 12,000 units are expected to deliver by that 

time. 

Phoenix is also likely undersupplied. The 

metropolitan area’s economy is in a mid-expansion 

phase according to Moody’s Analytics. In addition to 

the education and healthcare and professional and 

business services sectors, the financial services sector 

here has recently also become a driver of employment. 

Phoenix’s fairly well-diversified economy’s projected 

job growth should produce demand for more than 

13,000 multifamily units, but only about 11,000 units 

are underway.

Cautiously Optimistic Outlook LongerTerm

The expected mismatch of supply and demand for new 

class A multifamily units in many metropolitan areas is 

expected to be short-lived, lasting only the next 18 to 

24 months. Expected reductions in new supply over 

the next few years, coupled with expectations for 

continued demographic trends and that some 

metropolitan areas will see above-average job growth,

should result in multifamily rental demand remaining

stable over the longer-term. 

Source: Dodge Data & Analytics and Moody’s Analytics

% Increase 2018 to 2020

Market MF Inventory Total Jobs Difference

Minneapolis 5.4% 1.1% -4.3%

Richmond 6.0% 1.8% -4.1%

Oakland 6.1% 2.3% -3.8%

Washington, DC 5.7% 1.9% -3.7%

Austin 8.2% 4.6% -3.7%

Denver 5.5% 2.0% -3.5%

Nashville 5.8% 2.3% -3.5%

Miami 6.4% 3.0% -3.3%

Atlanta 4.7% 1.4% -3.3%

Boston 4.9% 1.6% -3.2%

Charlotte 6.1% 2.9% -3.1%

Orlando 7.7% 4.6% -3.1%

Columbus 4.6% 1.6% -3.0%

San Antonio 5.7% 3.0% -2.7%

Jacksonville 5.9% 3.4% -2.6%

Seattle 5.9% 3.4% -2.5%

Salt Lake City 4.6% 2.3% -2.3%

Philadelphia 3.5% 1.4% -2.2%

Raleigh 5.6% 3.5% -2.1%

Portland 4.8% 2.7% -2.0%

San Francisco 4.6% 2.7% -1.9%

Baltimore 2.8% 1.2% -1.5%

Indianapolis 2.9% 1.5% -1.5%

New York 2.9% 1.6% -1.3%

Los Angeles 2.4% 1.3% -1.1%

Dallas 5.6% 4.6% -1.1%

Chicago 2.4% 1.3% -1.1%

San Jose 3.5% 2.6% -1.0%

Orange County 2.4% 1.5% -0.9%

San Diego 2.0% 1.7% -0.3%

Tampa 2.7% 2.6% 0.0%

Sacramento 2.4% 2.5% 0.2%

Phoenix 3.0% 3.2% 0.2%

St. Louis 1.5% 1.9% 0.4%

Tucson 1.1% 1.6% 0.6%

Albuquerque 1.0% 1.6% 0.6%

Cleveland 0.6% 1.5% 0.9%

Las Vegas 1.6% 3.0% 1.4%

El Paso 1.4% 3.2% 1.8%

Houston 2.1% 4.0% 1.9%

 
© 2019 Fannie Mae. Trademarks of Fannie Mae. 6 of 6

Kim Betancourt

Director of Economics

Tim Komosa

Economist Manager

Multifamily Economics and Market Research

July 2019

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.