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Multifamily Economic and Market Commentary

JULY 2021 

2021 Multifamily Market Mid-Year Outlook – Demand Improving 

What a difference a year makes. National multifamily market fundamentals, which include factors such as 

vacancy rates and rents, were negatively impacted throughout much of 2020. Beginning at the end of 2020 

and continuing through the first half of 2021, however, there has been a significant turnaround, with 

multifamily demand increasing quickly, leading to improving rent growth and occupancy levels. We believe 

this multifamily rental housing demand is due to a combination of demographics, ongoing job growth, a 

nationwide shortage of housing, federal stimulus payments, and more local economies reopening and 

loosening or ending pandemic restrictions. As a result, we expect this overall trend to help boost multifamily 

housing demand over the next five years as well, as seen in the chart below. 

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Vacancy ( percent)

Absorption & Net Delivered Units (000s)

Forecasted National Multifamily Trends

Absorption Completions Vacancy Effective Rent Growth

Source: Moody’s Reis

Multifamily Vacancy Expected to Decline but not Plummet

We believe that the national multifamily vacancy rate will decline in 2021, but not as much as the current 

trajectory might suggest. That’s because new completions are expected to outpace demand, at least over the 

next 12 to 24 months, as illustrated in the chart above. Despite the expected ongoing increase in multifamily 

rental demand, newly delivered supply is expected to remain elevated throughout the year, which we believe will 

keep estimated vacancy levels relatively stable. As a result, we anticipate that the U.S. national multifamily 

vacancy rate should remain within an estimated range of between 5.25 percent and 5.75 percent by year-end 

2021. 
Multifamily Economic and Market Commentary

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Rent Growth Expected to Remain Positive

Rent growth was positive in the first half of 2021 after remaining negative during most of 2020, with much of 

the current momentum taking place during the second quarter of 2021, as seen in the charts below. We are 

estimating that rent growth surged in the second quarter by 3.0 percent for the quarter alone, but we do not 

believe this elevated pace will be sustained. Instead, we believe that this unusually large increase is due to 

pent-up demand stemming from the pandemic. As a result, we believe that rent growth will moderate quite a 

bit over the second half of the year, but annualized rent growth for 2021 could still come in at an above-average 

peak of 5.0 percent. 

Source: CoStar Advisory Services

Multifamily 28-Day Rent Change as of July 6, 2021 – All Property Average 

Multifamily 28-Day Rent Change as of July 6, 2021 – By Class Average 

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1 & 2 Star 3 Star 4 & 5 Star
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Multifamily Economic and Market Commentary

Concessions Starting to Tick Down

With rent growth trends increasing for all classes, as seen in the charts on the previous page, the number of 

multifamily units offering concessions has started declining. As of June 2021, 10.7 percent of all multifamily units 

are offering concessions, down from 15.8 percent as of June 2020. Although the average national concession rate 

across all multifamily properties of 8.6 percent is still elevated, it is just starting to tick down, as seen in the 

charts below. 

Class A concession levels remain higher than Class B and C units, indicating that property owners are continuing 

to offer more generous concessions upfront for newer class A units to compete with newly delivering supply. For 

those Class A units offering concessions, the average concession rate as of June 2021 was 9.6 percent – more 

than a month’s free rent – compared to the recent peak of 9.9 percent in March 2021. Class B and C units are 

faring slightly better, with an average concession rate of 7.8 percent as of June 2021, which is down from 

February 2021’s peak of 8.0 percent for Class B and 8.2 percent for Class C. 

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Concession Value (% of Asking Rent)

% of Units Offering Concessions

National Concession Rates by Class

Source: RealPage, Inc. 
Multifamily Economic and Market Commentary

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Demand for multifamily rental units has soared over the past several months, resulting in significant positive 

net absorption. Quarterly demand is estimated to have totaled 219,909 units in the second quarter of 2021 

alone compared to 48,308 units in the first quarter, according to data from RealPage, Inc. – a new peak. CoStar 

is also estimating a big increase in net absorption for all of 2021, with more than 524,000 units expected to be 

absorbed this year, compared to the more than 358,000 units that were estimated to have been absorbed in 

2020. 

Net Absorption Soared 

Source: RealPage, Inc. 

Although new multifamily leasing activity plunged at the end of March 2020 during the beginning of the 

pandemic and the resulting shutdowns, the trend has reversed itself in 2021 and has been on the upswing 

since February. As seen in the chart below, based on leasing data from RealPage, renewals tend to lead over 

new leases and have accelerated over the past several months. 

But there has been improvement in new lease signings as well. As seen in the chart below, new lease activity 

typically slows down quite a bit toward the end of each year, which reflects the seasonality of fewer move-ins 

during what is considered the holiday months. New lease activity tends to pick up during the latter part of the 

first quarter and then accelerates from early spring through early fall. 

While we are seeing that trend occur again in the 2021 data, at least through June, we are also seeing a trend 

suggesting that multifamily tenants are tending to renew their existing leases, most likely due to ongoing 

concessions that many property owners are still offering, even for existing tenants. 

Both Renewal and New Leases on the Rise 

Year-over-Year Change in Multifamily Executed Lease Signings

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New Leases Renewals
Multifamily Economic and Market Commentary

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Multifamily Sector Still Attracting Investment

Although data from Real Capital Analytics is showing that 2021 multifamily sales volume for the first five 

months of the year is up compared to the same time last year, it is still not expected to reach 2019’s estimated 

peak of $192 billion. Total multifamily sales activity for properties valued at $2.5 million or higher totaled $146 

billion in 2020, according to Real Capital Analytics, and currently 2021 is largely on a similar track. Multifamily 

property sales through June 2021 have totaled an estimated $73.6 billion, according to Real Capital Analytics. 

Based on recent transaction trends, we anticipate that multifamily property sales are unlikely to exceed $160 

billion in 2021. 

Despite our more somber outlook for the pace of sales activity over the remainder of the year, we are not 

expecting any real change in multifamily capitalization rates this year. Although multifamily prices are up 10.1 

percent year over year as of May 2021, according to the Real Capital Analytics Commercial Property Price 

Index, cap rates are staying steady at around 5.0 percent, where they have been for several months now, as 

seen in the chart below. As a result, we expect multifamily cap rates to remain stable for the rest of year, 

between a range of 4.75 percent and 5.25 percent. 

10-Year Treasury and Multifamily Capitalization Rates

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

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Multifamily Economic and Market Commentary

2021 Multifamily Mid-Year Outlook: Stabilization Ahead

Our outlook for the multifamily sector in 2021 has brightened with the expectation of stabilization ahead. We 

expect the volatility in rent growth and net absorption stemming from pent-up demand to be short lived. 

Additionally, we believe this momentum will last through the summer but then begin to normalize into early 

fall as local economies further stabilize, vaccination rates increase slightly, and the pandemic continues to 

recede. 

The impact from the expiration of the federal eviction moratorium currently set for the end of July 2021 is the 

multifamily sector’s big unknown. Multifamily rent collections have held up well for professionally managed 

properties, according to data from the National Multi-Housing Council’s Rent Tracker. While that survey 

reflects rent collections on about 11 million multifamily rental units, it does not include all renters. Indeed, 

according to the Census Bureau’s Household Pulse Survey from June 7, 2021, an estimated 7.1 million renters, 

including both multifamily and single-family renters, were behind on their rent payments, and 1.2 million 

renters were concerned that they would be evicted within the next 60 days. Even more sobering, although 

emergency rental assistance is in place, through the end of May only an estimated 350,000 renter households 

have received such assistance, according to a recent report issued by the U.S. Department of Treasury. 

However, the recent increases in job growth help support our more optimistic outlook for the multifamily 

sector. As more people get back to work, and with wage growth also increasing, we believe that many renters 

behind on their rent payments will be in a better position to either enter a rent repayment plan or simply 

move before the eviction moratorium expires. We do expect some volatility in net absorption over the latter 

part of the year, because we are expecting a fair amount of tenant movement to occur at that time. And with 

more than 492,000 units of new supply expected to deliver in 2021, we believe there will be additional 

pressure on future rent growth – and concessions – in some of the nation’s largest metros. 

We believe an improving outlook is appropriate for the multifamily sector for the rest of 2021, based on 

demographic trends, better economic conditions, expected job growth, rising wages, and expected continued 

improvement containing the COVID-19 pandemic. 

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Multifamily Economic and Market Commentary

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Kim Betancourt, CRE

Senior Director

Tim Komosa

Senior Manager

Fannie Mae Multifamily Economics and Strategic Research

July 14, 2021

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.