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Multifamily Economic and Market Commentary

JANUARY 2022

2022 Multifamily Market Outlook: Defying Gravity

The multifamily sector experienced an unexpected resurgence in demand in 2021 due to the combination of a 

factors, including an improving national economy, the advent of readily available vaccinations and boosters, 

pent-up demand, and favorable demographics. We expect a similar trend in 2022, with demand stabilization 

anticipated to commence starting in the latter part of the year. It is important to note that although the overall 

national trend is expected to remain above average for the year, multifamily fundamentals and trends are 

expected to vary by metro, submarket, and, in some cases, neighborhood. 

The national multifamily vacancy rate is expected to remain stable in 2022 at about 5.0 percent, as illustrated in 

the chart below, and then begin to trend upward further out in the forecast in 2023 to 2024. The pace of 

absorption is expected to normalize this year due to the elevated number of new units delivering over the next 12 

months. In addition, we expect that concession levels will continue to normalize, but concession levels may 

increase during the late spring and summer months as some renters might encounter “sticker shock” upon the 

renewal of their leases at the pre-concession level and the expiration of the past year’s generous discounts. 

Source: Fannie Mae MF ESR * Projected

Demand for multifamily rental units was quite robust in 2021, and we expect it to remain positive but moderate 

further out in the forecast starting in 2023. According to data from RealPage, multifamily demand was estimated 

at 673,478 units in 2021, compared to an estimated 296,520 units in 2020. For 2022, RealPage is anticipating 

annual demand of 233,305 multifamily units this coming year, followed by 189,234 units of multifamily demand in 

2023. 

Positive Demand Expected to Continue in 2022

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

Annualized Multifamily Rent and Vacancy – Estimated and Projected
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Rent Growth Expected to Moderate but Remain Strong

We estimate that national rent growth reached at least 10 percent in 2021, after having ended 2020 at an 

estimated negative 0.75 percent. We believe that pent-up demand in 2021, coupled with an improving economy 

and generous concessions available on many multifamily units, allowed rent growth to soar to unprecedented 

highs. We expect rent growth to remain positive in 2022 but to moderate from last year’s accelerated pace to a 

more reasonable, yet still-elevated level. As a result, we expect rent growth this year to be within a range of 4.0 

to 5.0 percent by year-end 2022. 

Multifamily Economic and Market Commentary

Vacancy Expected to Remain Flat

The national multifamily vacancy rate is expected to remain flat in 2022, primarily due to the amount of new 

supply expected to deliver over the next 12-18 months, coupled with the expected increase in rental demand 

stemming from improving employment trends. Although much of this new supply is expected to consist of 

more expensive, class A units in many places, we believe that higher single-family home prices may cause 

some tenants to opt for newer rental units that offer more amenities. As a result, we believe the national 

vacancy rate will remain near its current level of 5.0 percent throughout 2022 and even into early 2023. It is 

important to note that remaining at this level would be below both the longer-term historical average and the 

most recent estimated vacancy peak of 6.0 percent that occurred in first quarter of 2021, as seen in the chart 

below. 

Estimated National Vacancy and Rent Trends through Fourth Quarter 2021 

Source: Fannie Mae Multifamily ESR

3.0%

5.0%

7.0%

9.0%

$925

$1,025

$1,125

$1,225

$1,325

$1,425

$1,525

Rent Level Vacancy Rate

* Preliminary estimate
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Multifamily Economic and Market Commentary

Demand for all classes of multifamily units soared in 2021, as illustrated below. According to data from RealPage, 

Inc., as of fourth quarter 2021, year-over-year effective rent growth for both Class A and B units rose by more than 15 

percent. Class C effective rent growth also experienced an upswing in growth, climbing by more 7.0 percent yearover-year. We believe that the increase in rent growth across the board last year stemmed from a combination of 

factors, including a quickly rebounding economy, increased job growth, and a pent-up demand for housing, coupled 

with generous concessions available in the first half of the year, to spur both a run-up in rental household 

formations and a “move up” trend by Class B and C renters.

National Multifamily Concession Rate by Class

0%

1%

2%

3%

4%

5%

6%

7%

8%

A B C

Concession Rates 

5%

10%

15%

20%

25%

30%

A

B

C

Percent Of Units Offering Concessions

Source: RealPage

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Although the number of multifamily units offering concessions plummeted during 2021, concession rates 

themselves remained elevated, as seen in the charts below. As of fourth quarter 2021, only an estimated 10 percent 

of all multifamily rental units were offering concessions, compared to nearly 23 percent in the fourth quarter of 

2020, and well below the most recent trough of 14 percent in third quarter 2018. And while concession levels are 

below one month’s free rent on average, they remain well above recent historical trends, as seen in the chart below 

left. 

-10%

-5%

0%

5%

10%

15%

20%

% CHANGE FROM PRIOR YEAR

A B C

Source: RealPage

National Effective Rent Growth by Class

All Classes Experienced Unexpectedly Elevated Rent Growth in 2021 

Concessions Heading Back Down 
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Multifamily Economic and Market Commentary

New Multifamily Supply Expected to Peak in 2022, Maybe 

According to estimates from Dodge Data & Analytics Supply Track, which distinguishes between multifamily 

properties consisting of apartment and condominium units, more than 386,000 apartment units were completed 

in 2021, down slightly from 2020’s nearly 405,000 units – the most recent peak year for new deliveries. Although 

Dodge Data & Analytics believes that the number of units slated for completion in 2022 is estimated at more than 

600,000, we believe it is unlikely that all those units will be completed before year-end. 

According to the National Multifamily Housing Council’s Construction Survey, as recently as September 2021, 

more than 93 percent of survey respondents stated that they were experiencing construction delays. And while 

91 percent of respondents reported delays in permitting, entitlement, and professional services as the cause of 

delays, more than 98 percent of respondents reported that their projects were also being impacted by a lack of 

materials and 100 percent were dealing with an increase in the pricing of those materials. In addition, 88 percent 

of respondents reported that their projects were being impacted by the availability of labor, with 54 percent 

stating that they were seeing less availability even after offering higher compensation levels of about 12 percent 

on average. These are all issues that are likely to take time to rectify, and as a result, we expect will be a drag on 

construction of new multifamily properties for at least the next six months, if not longer. 

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0

20

40

60

80

100

120

140

160

180

THOUSANDS OF UNITS

Apartments Condos

Multifamily New Construction

Source: Dodge Data & Analytics Supply Track, January 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

Continued but More Normalized Demand in 2022

At a national level, we project 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 600,000 new units slated for completion will be delivered by year-end, the economic 

recovery and the amount of job growth combined are still likely to produce enough demand to outpace even a 

reduced slate of deliveries.

Year-over-year job growth is expected to be 2.8 percent by the end of 2022, according to Fannie Mae’s latest 

economic forecast, which could result in an estimated 4.3 million jobs. Based on that amount of job growth, 

theoretically multifamily rental demand could range from 400,000 units to as high as 700,000 units. That is 

because vacancy levels are so tight across most of the country, that both replacement demand and new demand 

for multifamily rental housing are expected to continue competing for a limited number of available units.

Much of the 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, many of the impacted submarkets are some of the most expensive in the 

country, all of which continue to see a rebound in demand and rent growth. As a result, we believe continued 

demand for multifamily rental units will drive the momentum for positive fundamentals – and absorption – over 

the next 12 months. 

 -

 20

 40

 60

 80

 100

 120

Thousands

Beyond 2023

2022 2021

Source: DodgeData & Analytics, January 2022– 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

The nation is expected to see widespread positive job growth this year, as illustrated in the two charts below. 

Although Fannie Mae’s forecast for 2022 is anticipating a national employment growth rate of 2.8 percent, there are 

some metros that are expected to be below the national estimate, including Chicago, Cleveland, Indianapolis, and 

St. Louis. And yet, these are all metros that are expected to not have enough new multifamily supply to meet potential 

demand. For example, the Chicago metro is expecting 7,212 new multifamily units in 2022, but based on Moody’s 

Analytics’ anticipated job growth rate of 2.3 percent, the metro could produce demand for about 17,000 rental units, 

leaving a potential shortfall of 10,000 units. Indianapolis has fewer than 1,800 multifamily units expected to deliver 

this year, but with Moody’s Analytics expecting a job growth rate of 2.5 percent, the metro could still produce demand 

for more than 4,000 rental units, leaving a shortfall of more than 2,500 units. St. Louis could also have a shortfall in 

new supply: An expected job growth rate of just 2.3 percent could still produce demand for about 5,000 new 

multifamily units, but fewer than 3,000 new units are expected to deliver over the next 12 to 18 months. 

Demand Outpacing Supply in Many Metros

Many Metros Need More Supply

Some metros, especially in California, continue to be chronically undersupplied, including Los Angeles, with a 

conservative shortage of at least 10,000 units; the Inland Empire, with a potential shortage of more than 8,000 units; 

and even San Francisco, with a possible shortage of more than 5,000 multifamily units. 

In addition, job growth in some metros is expected to be well above the national average this coming year, likely leading 

to a supply/demand imbalance. For example, two Florida metros, Tampa and Miami, are both expected to surpass the 

national employment growth average, with expected job growth of at least 4.0 percent or higher, due to continued 

expansion in the professional services, technology, leisure and hospitality, and logistics and transportation sectors. And 

yet both could be undersupplied based on anticipated new multifamily unit deliveries. Although Miami is expecting 

about 20,000 new multifamily units this coming year, the number of anticipated new jobs could produce demand for 

more than 22,000 new units. Tampa’s new multifamily supply is estimated at about 8,700 units this coming year, but 

projected job growth of 4.6 percent could potentially produce demand for at least 11,000 multifamily units. 

On the other side of the country, we believe that once again Las Vegas is likely to be undersupplied. With Moody’s 

expecting job growth there of more than 5.0 percent, there could be demand for more than 8,000 rental units, yet only 

about 1,600 multifamily units are expected to deliver in 2022. 

Select Markets with Higher Expected 2022 

Employment Growth

0% 1% 2% 3% 4% 5% 6% 7%

FM National

Boston

Austin

San Francisco

New Orleans

Seattle

Jacksonville, FL

Tampa

Miami

Las Vegas

Orlando

Select Markets with Lower Expected 2022 

Employment Growth

0% 1% 2% 3%

Kansas City, MO

Hartford

Birmingham

Chicago

St. Louis, MO

Virginia Beach

Pittsburgh

Cleveland

Indianapolis

Philadelphia

FM National

Source: Fannie Mae (National); Moody’s Analytics (Metros)
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Multifamily Economic and Market Commentary

2022 Multifamily Outlook: Defying Gravity

We maintain a positive outlook for the multifamily sector in 2022. We expect the multifamily sector will continue to 

benefit from solid demand drivers, leading to improved fundamentals as reflected in a more normalized return to 

rent growth, stabilizing vacancy rates, and rising property values. We also expect that the multifamily sector will 

outperform other commercial real estate property types, most notably retail and hospitality, due to the lingering 

effects of the supply chain disruption and the ongoing pandemic continuing to impact in-person consumer 

spending, as well as the slow but improving recovery in business travel. 

As a result, we expect multifamily mortgage origination volume levels will increase in 2022 compared to 2021. As of 

August 2021, the Mortgage Bankers’ Association is estimating that multifamily originations volume will be $409 

billion in 2021 and $421 billion in 2022, but that is likely to change. Based on current trends, our own annual 

multifamily originations are much higher: at least $450 billion in 2021 and $475 billion in 2022. 

As the economic recovery continues, along with rising home prices, we believe that demographics and rental 

housing demand will keep multifamily fundamentals positive over the next 12 months. 

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Treasury Interest Rates and Multifamily Capitalization Rates

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

With interest rates remaining low over the past year and housing prices estimated to having risen by more than 15 

percent in 2021, the demand for rental housing has kept many investors focused on the multifamily sector. 

Indeed, preliminary data from Real Capital Analytics suggests that multifamily sales could have totaled more than 

$264 billion in 2021, much of which was likely spill-over demand from 2020. Over the past two years, average 

multifamily capitalization rates have further compressed, as seen in the chart below. Although national 

multifamily cap rates started 2020 at approximately 5.3 percent, according to data from Real Capital Analytics, 

rates are estimated to have ended 2021 at 4.7 percent, a new low. 

Although we anticipate an increase in the 10-year Treasury this coming year, we do not expect that multifamily 

cap rates will follow in lock-step. Instead, we expect that multifamily cap rates will remain low – again – in 2022 

because the spread between the two is expected to remain fairly wide, giving multifamily property owners and 

investors a risk cushion.

Multifamily Property Sales Reach Unprecedented Peak in 2021

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

Senior Director of Economics

Tim Komosa

Senior Manager

Fannie Mae Multifamily Economics and Strategic Research

January 19, 2022

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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