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The multifamily sector experienced strong demand during the first half of 2022, resulting from a combination of 

favorable demographics, continued job growth, rising wages, and increased renter household formations. This demand 

is expected to continue for the remainder of the year, albeit at a more moderate pace. That said, it is important to note 

that although national trends are expected to remain above average over the next six months, multifamily 

fundamentals and demand can, and do, change and will vary by metro, submarket, and, in some cases, by 

neighborhood. 

Further out into the forecast, our more tempered outlook for the sector is based on stubbornly persistent inflation, 

recession expectations, and elevated new multifamily supply, much of which is now expected to be completed and 

delivered over the next 18 months. Nevertheless, we also believe demand for multifamily rental housing will remain 

positive because elevated single-family housing prices along with higher interest rates are making homeownership far 

less affordable, perhaps convincing many renters-by-choice that staying in their units longer is the better option. 

Multifamily Vacancy Expected to Rise Modestly

Multifamily Economic and Market Commentary

July 2022

2022 Mid-Year Multifamily Market Outlook – Demand Remains Resilient 

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4%

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8%

10%

12%

14%

16%

-50

0

50

100

150

200

250

300

350

Vacancy and Rent Growth 

Absorption & Net Delivered Units (000s)

Forecasted National Multifamily Trends

Absorption Completions Vacancy Effective Rent Growth

Source: Moody’s Analytics CRE

Although the national multifamily vacancy rate declined during the early part of 2022, we believe it will start to 

slowly rise over the remainder of the year, and into 2023. Despite expected ongoing multifamily rental demand, 

newly delivered supply is expected to remain elevated throughout the year, thereby keeping estimated vacancy 

levels relatively stable. In addition, supply chain constraints continue to impact the construction sector, pushing 

out delivery timelines. Therefore, many new completions that were expected in 2022 are now expected to be 

delivered n 2023. We believe this new supply could outpace demand, as illustrated in the chart above. As a result, 

we anticipate that the U.S. national multifamily vacancy rate will remain within an estimated range of between 

4.75 percent and 5.0 percent by year-end 2022. Although we believe it could climb to 5.25 percent by year-end 

2023, it would still be below its estimated 15-year average of 5.8 percent. 
Multifamily Economic and Market Commentary

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Rent Growth Expected to Decline but Normalize...

Rent growth has been positive thus far this year, as seen in the charts below. We are estimating that rent growth was 

4.5 percent for the first half of 2022 due to continued rental demand stemming from positive job and wage growth. 

We expect that the trajectory of rent growth over the second half of the year will begin to ease, ending the year in the 

range of 6.0 percent to 7.0 percent. For comparison, as of July 7, 2022, CoStar is also expecting overall rent growth to 

be nearly 6.5 percent in 2022, and then to further decline over the next few years, as seen in the chart below. 

Source: CoStar, Inc. – Data as of July 7, 2022 

Multifamily Effective Rent Change 2010 – 2025 – All Multifamily Classes

Demand for all classes of multifamily units has remained strong so far this year. In fact, as of July 7, 2022, CoStar is 

expecting Class A unit rents to see the highest level of rent growth this year, forecasted at 6.9 percent compared to 

14.7 percent in 2021. Class B rents are not far behind at an estimated 6.5 percent in 2022, compared to 12.5 percent 

in 2021, and Class C units are forecasted to see rent growth of 5.9 percent this year, compared to an estimated 7.7 

percent rent growth last year. 

Further out into the forecast, CoStar is expecting that rents for all classes of units will trend downward, as seen 

below. However, overall demand is expected to remain steady, as evidenced by the minimal distinction in rent 

growth percentages between classes of units, with Class B rent growth expected to outpace Class A, as soon as early 

2023.

... With Very Little Differentiation Between Classes

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Effective Rent Growth Forecast

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Class A Class A Fcst

Class B Class B Fcst

Class C Class C Fcst

Multifamily Effective Rent Change 2019 – 2025 – By Class

Source: CoStar, Inc. – Data as of July 7, 2022 
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Multifamily Economic and Market Commentary

Concessions Still Above Average but Scarce

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11.0%

A B C

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6.0%

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12.0%

14.0%

16.0%

18.0%

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A B C

Concession Value (% of Asking Rent)

% of Units Offering Concessions

National Concession Rates by Class

Source: RealPage, Inc. 

With rent growth trends remaining elevated for all classes of units, as seen in the charts on the previous page, the 

number of multifamily units offering concessions has been declining. As of June 2022, only 5.1 percent of all 

multifamily units are offering concessions, down from 10.7 percent in June 2021 and 15.9 percent in June 2020. 

Although the average national concession rate across all multifamily properties of 8.1 percent is lower than June 

2021’s 8.6 percent, it remains elevated compared to pre-pandemic trends closer to the 6.0 percent range. 

Class A concession levels remain higher than those for 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 delivered 

supply. For those Class A units offering concessions, the average concession rate as of June 2022 was 9.1 percent 

– more than a month’s free rent – and not much different from June 2021’s 9.6 percent or even its recent peak of 

9.9 percent in March 2021. Class B and C units have an average concession rate of 7.2 percent as of June 2022 

compared to 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. 

Source: RealPage, Inc. 
Multifamily Economic and Market Commentary

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Demand for multifamily rental units appears to have remained positive during second quarter 2022, according to 

data from Moody’s CRE, with quarterly demand estimated at about 30,000 units. As of July 7, 2022, CoStar is also 

projecting an increase in net absorption for second quarter 2022, with nearly 65,000 units absorbed compared to 

62,360 units absorbed in first quarter. CoStar is expecting that more than 369,000 units will be absorbed this year, 

which is down from the more than 698,000 units estimated to have been absorbed in 2021. 

Ongoing Demand Keeps Net Absorption Positive 

Source: RealPage, Inc. 

Although new multifamily lease rates plunged at the end of March 2020 during the beginning of the pandemic, the 

trend reversed itself beginning in early 2021, with demand staying well above historic norms. As seen in the chart 

below, demand has been so strong that new leases have seen rental rate increases of nearly 20 percent as of June 

2022, with renewals also at well-above-average levels with rental rate increases of more than 10 percent. 

Demand Pushed Up Rents... 

Rental Rate Change for New Leases and Renewals All Multifamily Units

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New Leases Renewals

Year-over-year revenue rates also 

increased over the past year, as seen in 

the bottom right chart. 

According to data from RealPage, 

although revenues for Class C increased 

slightly during the height of the 

pandemic in 2020, both Class A and B 

revenues had declined into negative 

territory. By late spring 2021, however, 

revenue growth was modestly positive 

for all classes of units. Indeed, as of June 

2021, year-over-year revenues for Class 

A units had increased just 0.7 percent.

Since then, however, revenue growth 

has climbed at a fast clip. Class A 

revenue growth has surged by more 

than 12 percent over the past 12 

months. Class B units have experienced 

a similar trend, with year-over-year 

revenues up more than 11 percent as of 

June 2022. Even Class C units, those 

offering the least expensive rents in a 

metro, still saw year-over-year revenue 

growth of slightly more than 4.0 percent 

as of June 2022. 

... and Revenues As Well 

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14% YOY Revenue Change Class A

YOY Revenue Change Class B

YOY Revenue Change Class C

Year-Over-Year Revenue Change by Class 

Source: RealPage, Inc. 
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18.0% All CRE Cap Rate 10 Year Treasury

Multifamily Economic and Market Commentary

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Investors Remain Focused on Multifamily Sector

Although data from Real Capital Analytics show that multifamily sales volume for the first five months of the year is 

up compared to the same time last year, we do not expect it to reach 2021’s historic peak of $360 billion for 

properties valued at $2.5 million or higher. Instead, we believe that the combination of rising interest rates and stilllow capitalization rates is likely to keep a number of potential buyers on the sidelines this year. That said, there are 

anecdotal reports of recent multifamily buyers having cap rates that are below Treasurys or even their current 

mortgage rates – a phenomenon not seen since the 1980s, as shown in the chart below. 

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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10-Year Treasury Cap Rates

10-Year Treasury and ACLI All Commercial Property Capitalization Rates – 1Q1980 – 1Q2022

Nevertheless, we believe that multifamily cap rates will rise slightly during the second half of the year, from the current 

rate of about 4.7 percent to 5.0 percent by year end. Multifamily prices have risen by 23 percent year over year as of May 

2022, according to the Real Capital Analytics Commercial Property Price Index. With a recession potentially looming, as 

well as consumer confidence weakening, it appears that many commercial real estate investors are deciding that future 

demand for multifamily is a better bet than for other property types, such as office or retail. Indeed, as of May 2022, 

office and retail cap rates remained well over 100 basis points higher than multifamily cap rates, averaging 6.3 percent 

and 6.4 percent, respectively, according to data from Real Capital Analytics. 

Source: ACLI, Commercial Mortgage Commitments (CMC) and Federal Reserve, Selected Interest Rates H.15, per Moody’s Analytics
Multifamily Economic and Market Commentary

2022 Multifamily Mid-Year Outlook: Demand Remains Resilient

Our outlook for the multifamily sector for the remainder of 2022 remains positive. We expect rent growth to remain at 

above-average levels in 2022 (in the range of 6.0 percent to 7.0 percent) and vacancy rates to tick up to 5.0 percent by 

year end. We expect multifamily cap rates to increase only slightly, up to 5.0 percent from the current 4.7 percent. 

Further out in the forecast, we expect demand to moderate, as job growth slows, inflation remains elevated, and new 

multifamily supply starts to deliver in earnest. With interest rates expected to continue increasing over the next 12 to 

18 months, we believe that the pace of multifamily property sales will slow, ending the year at an estimated $210 

billion in volume, which is still above 2019’s estimated sales volume of $193 billion, according to Real Capital 

Analytics. 

As a result, we have revised downward our 2022 multifamily originations outlook to $425 billion, from our prior 

forecast of $475 billion, based on rising rates and current property sales trend, and an anticipated slowdown in the 

pace of delivery of new units due to ongoing supply chain issues, labor shortages, and volatile material prices. We 

expect 2021 multifamily originations to have been $450 billion, if not higher. As a comparison, the Mortgage Bankers 

Association’s estimate for 2021 multifamily originations was adjusted upward to $470 billion, as of April 2022, but has 

been scaled back to $418 billion for 2022. 

We believe a stable outlook is appropriate for the multifamily sector for the rest of 2022, based on demographic 

trends, expected job growth, and household formation trends. However, persistent inflation and recessionary fears 

are potential headwinds facing the sector in 2023. 6

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Base Downside Severe Downside

Source: CBRE-EA 

National Multifamily Cap Rate Forecast

As seen in the chart above, the various cap rate forecast scenarios reflect a tight band between baseline and severe 

downside, according to CBRE Econometric Advisors. Its baseline multifamily cap rate forecast as of May 2022 

anticipates a 10-basis point increase by the end of 2022 and then an increase of another 10 basis points over the next 

three years. The downside scenario anticipates a 20-basis point increase by year end and then an increase of another 

30 basis points by year end 2025. And for its severe downside forecast, CBRE Econometric Advisors expects a 70-basis 

point increase between now and year-end 2025. The key takeaway is that, as of May 2022, the real estate research firm 

is not anticipating a significant increase in multifamily cap rates over the next several years, even in the event of a 

severe economic downturn. 

Not Much Differentiation in Multifamily Cap Rate Forecast Scenarios
Multifamily Economic and Market Commentary

Kim Betancourt, CRE

Vice President

Tim Komosa

Senior Manager

Multifamily Economics and Strategic Research

July 2022

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

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Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it 

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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 

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