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Multifamily Economic and Market Commentary

JANUARY 2024

2024 Multifamily Market Outlook: Instability Expected as Skies Remain Cloudy

Based on preliminary data, multifamily rental growth is estimated to have turned negative during the fourth quarter of 

2023, after having been at more moderate levels earlier in the year. Our prediction of turbulence in the multifamily market 

last year was correct, and it appears that it is likely to continue into 2024. Rental demand differed depending upon the 

metro: Those with a lot of new supply, such as Austin, Phoenix, and Jacksonville, have seen negative rent growth over 

the past six to 12 months. In contrast, metros that are supply constrained, such as Kansas City, Cincinnati, and St. Louis, 

have seen above-average rent growth, according to data from RealPage. At a national level, rental demand remained 

positive for much of 2023, due to stronger-than-expected job growth, smaller-but-continued wage increases, elevated 

interest rates, and an overall shortage of housing, especially for-sale housing, keeping many renters-by-choice renting –

for now. 

We expect the economy to grow at a below-trend rate in 2024 and note that the risk of a recession remains elevated. 

Coupled with more than one million multifamily rental units underway, we are once again expecting lower-than-normal 

rent growth this year along with a slightly higher national vacancy rate. We expect rent growth to be in the range of just 

1.0% to 1.5% in 2024, and we believe it could stumble if job growth worsens significantly. The national multifamily vacancy 

rate is expected to rise to 6.25% this year, as illustrated in the chart below, and then begin to stabilize at 6.0% in 2025. The

pace of absorption is expected to remain positive but only slightly higher this year due to the high number of new units 

delivering over the next 12 to 18 months. We also expect that the percentage of units offering concessions will increase and 

that concession levels will rise in oversupplied markets. 

Source: Fannie Mae MF ESR p = preliminary * Projected

Demand for multifamily rental units started out slowly in 2023 and picked up during the second and third quarters but 

then slowed during the last three months of the year. According to data from CoStar, annualized multifamily demand 

was estimated at 331,533 units at the end of 2023, compared to an estimated 148,160 units in 2022. In addition, CoStar 

is anticipating that demand will rebound in 2024, ending the year with an annualized 424,902 units of multifamily 

demand. 

Demand Expected to Improve Later in 2024

Annualized Multifamily Rent and Vacancy – Estimated and Projected

3.0%

5.0%

7.0%

9.0%

$925

$1,125

$1,325

$1,525

$1,725

Rent Level Vacancy Rate
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Rent Growth Expected to Remain Below Average

We believe that national rent growth was positive in 2023, but just barely, at an estimated 0.75%, despite turning 

negative at the end of the year. Last year’s annualized rent increase is down significantly from an estimated 4.75% in 

2022 and estimated 10% in 2021. We expect rent growth to start the year negative, but then turn slightly positive 

during the second and third quarters, and then turn negative again in the fourth quarter, resulting in an annualized 

range of between 1.0% and 1.5%.

However, it is important to note that if job growth turns significantly negative, and the broader economy slows down or 

enters a recession, rent growth could stagnate further or even end the year negative. There is still too much 

uncertainty at this stage to know how rent growth might ultimately be impacted over the coming months. 

Multifamily Economic and Market Commentary

Vacancy Expected to Increase

The national multifamily vacancy rate is estimated to have risen in late 2023 and is expected to rise again in 2024, 

primarily due to the amount of new supply expected to deliver this coming year, on top of the more than 500,000 units 

that were expected to have been added in 2023. Much of this new supply consists of more expensive, class A units in 

many places, which should help improve the pace of filtering down the existing multifamily housing stock, resulting in 

a higher number of less expensive class B units. 

As a result, we expect that the amount of new supply completing over the next 12 months will push the national 

vacancy rate up to 6.25% in 2024. It is important to note that this elevated level is expected to be short-lived and is 

expected to drop back down to 6.0% by 2025, as seen in the chart on the previous page. Additionally, a vacancy level of 

6.0% to 6.25% is not that much higher than the long-term average of 5.75% from 2005 through 2022. 

Estimated National Vacancy and Rent Trends through Fourth Quarter 2023 

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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Multifamily Economic and Market Commentary

Demand for all classes of multifamily units remained subdued through much of 2023, as illustrated below. According to 

data from RealPage, Inc., as of fourth quarter 2023, quarterly effective rent growth for class A and B units had turned 

negative, to negative 0.69% for class A and negative 1.11% for class B. Class C rent growth was estimated to have 

remained positive but just barely at 0.33% for the quarter. We believe that the slowing in rent growth across all classes 

later in the year was the result of new supply entering many local markets, as well as weaker demand from new renters.

National Multifamily Concession Rate by Class Percent Of Units Offering Concessions

Source: RealPage, Inc. 3

The number of properties offering concessions increased throughout much of last year, as seen in the chart below 

right. As of fourth quarter 2023, an estimated 18.1% of class A units were offering concessions, up from 13% a year 

ago. Class B units increased to 18.5% from just 12.5% in fourth quarter 2022, as did Class C units, which reached an 

estimated 18.6% as of fourth quarter 2023 compared to 9.5% a year ago. 

Although the percentage of units offering concessions has been increasing for quite awhile, the concession levels 

themselves remained below one month’s free rent, or 8.3%, as seen in the chart below left. Nevertheless, we expect 

that both the value of concessions and the number of units offering them will increase in 2024, primarily in 

oversupplied metros. 

-4%

-2%

0%

2%

4%

6%

8%

% CHANGE FROM PRIOR YEAR

A B C

Source: RealPage, Inc. 

National Effective Rent Growth by Class

All Classes Experienced Below-Average Rent Growth in 2023 

Concessions Likely Heading Up in 2024 

0%

1%

2%

3%

4%

5%

6%

7%

8%

A B C

5%

10%

15%

20%

25%

30%

A B C
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Multifamily Economic and Market Commentary

New Multifamily Supply Expected to Peak in 2024 

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

multifamily properties consisting of apartment and condominium units, more than 500,000 apartment units were 

likely completed in 2023, up notably from 2022’s 475,000 units – the most recent peak year for new deliveries. 

Although Dodge Data & Analytics is currently tracking nearly 736,000 multifamily rental units slated for 

completion in 2024, we believe it is very unlikely that all those units will be completed before year end, due 

primarily to ongoing construction labor shortages, rising material costs, economic uncertainty, and delays, 

notably permitting and financing delays. 

Indeed, according to the National Multifamily Housing Council’s Construction Survey, as of December 2023, 84% 

of respondents reported construction delays, with most stating the delays were caused by either permitting 

requirements or in actually getting the project started. And of those experiencing delays getting their projects 

started, 83% stated it was due to economic uncertainty and 79% said it was due to construction financing 

concerns. 

Higher material costs were another issue, specifically noting that electrical component prices increased 11% and 

appliance costs increased 7%. And although 19% of respondents noted that there were more construction 

workers available, the majority, about 74%, noted that it was about the same as it was during the prior quarter. 

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Multifamily New Construction

Source: Dodge Data & Analytics Supply Track, January 2024

* 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. 

0

50

100

150

200

250

Thousands

Apartments Condos
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Multifamily Economic and Market Commentary

Subdued Multifamily Demand Expected to Continue in 2024

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 736,000 new units slated for completion will be delivered by year-end 2024, the 

possibility of slower growth or even possible recession coupled with slowing job growth means that there is 

unlikely to be enough demand to keep up with the wave of new deliveries in some metros.

Year-over-year job growth is expected to be positive but subdued by the end of 2024, according to Fannie Mae’s 

latest economic forecast, resulting in only a slight increase in the number of new jobs being added. That would 

likely keep new multifamily rental demand weak, just as an elevated level of new units are expected to deliver. 

Much of this new supply is primarily concentrated in about 15 metros, as seen in the chart below. In addition, 

several of the impacted submarkets are located in some of the most expensive metros in the country, including 

New York, Washington,DC, Seattle, and Los Angeles. 

Although Moody’s Analytics is expecting some metros to see positive job growth in 2024, such as Austin, Orlando, 

and Phoenix, the amount of expected new units could still easily outstrip demand. 

Source: Dodge Data & Analytics, January 2024– Metros with 5,000 ormore 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

5

0

20

40

60

80

100

120

140

160

180

Beyond 2024

2023 2022
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Multifamily Economic and Market Commentary

There are a number of oversupplied metros across the country, in terms of the amount of new supply underway 

compared to the current inventory of multifamily units. As seen in the chart below, metros such as Austin, Denver, 

Charlotte, Miami,Orlando, Nashville, Raleigh, Colorado Springs, and Huntsville, all have more than 10% of their 

respective multifamily inventories underway. In general, a market is considered in balance when it has between 2% 

and 4% of inventory underway, and with some of these metros expecting below average job growth this year, many 

are expected to remain oversupplied over the next 12 to 18 months.

Many Metros are Oversupplied...

Source: CoStar

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

10

20

30

40

50

60

70

Units Underway % of Market Units

Units Underway Thousands

Units Underway Units Underway % of Market Units

Multifamily Units Underway and Percent of Market Units – Select Metros

In contrast, some metros could be undersupplied, including New York, Los Angeles, Chicago, Houston, the Inland 

Empire, Portland, and San Diego, all with about 4% or less of inventory underway. For example, many California 

metros are likely to remain undersupplied, despite a recent increase in new construction, due to pent-up demand 

for rental housing after decades of underbuilding coupled with elevated single-family housing prices. 

... But Others Are Not
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Multifamily Economic and Market Commentary

Although at a national level job growth is expected to be just 0.6% in 2024, Moody’s is expecting a number of metros 

will see job growth exceed the national average, as illustrated below. Some Texasmetros, such as Austin, Dallas, and 

Houston, are all expected to have job growth of between 1.0% and 2.0%, making them some of the best performing in 

the nation. Yet it is not expected to be enough to keep up with all the potential new supply. For example, with job 

growth forecasted at 1.3% this coming year, Austincould produce demand for about 5,900 new multifamily units, but 

the new supply expected to deliver in 2024 totals more than 28,000 units, meaning an excess of more than 22,000 

units. Dallas is expecting about 34,000 new multifamily units in 2024 but based on Moody’s Analytics’ anticipated job 

growth rate of 1.1%, the metro would likely only have demand for a little more than 12,000 units, leaving a potential 

excess of 29,000 units. Houston, which Moody’s expects to have some of the nation’s best job growth at 2.0% this 

year, is expecting nearly 25,000 multifamily units, but the expected number of new jobs is likely only going to produce 

demand for about 13,000 units, leaving an excess of more than 11,000 units. 

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

... But Others Become Undersupplied by 2025

There are some metros, such as Las Vegas, Los Angeles, Chicago, and Orlando, that might have too much supply this 

year, but could be undersupplied by as soon as 2025. For example, Las Vegas has more than 5,500 units expected to 

deliver by the end of 2025, and while it is expected to be oversupplied in 2024, by the following year, it could actually be

undersupplied by more than 2,500 units. Los Angeles is also expected to be briefly oversupplied this year, by about 

5,800 units, but will likely fall short by an estimated 3,400 units by 2025. Similarly, Chicagois expected to be 

oversupplied by about 5,300 units this year but will be undersupplied by about 2,100 the following year. Orlando has a 

projected oversupply of more than 11,000 units in 2024, but just a year later could be short by a little more than 1,250 

units. In some metros, patience will likely be a virtue in terms of waiting for a multifamily supply/demand balance.

Select Markets with Higher Expected 2024 

Employment Growth

0% 1% 2%

Riverside-S. B.

Memphis

Jacksonville

Dallas-Ft Worth

Miami-FLL-PB

Phoenix

Raleigh

Salt Lake City

Boise City

Austin

Orlando

Las Vegas

New Orleans

Houston

Honolulu

Select Markets with Lower Expected 2024 

Employment Growth

-1% 1% 2%

Kansas City

St. Louis

Pittsburgh

Providence

Hartford

Detroit

Bridgeport

Chicago

Louisville

Cleveland

Omaha

Oklahoma City

Milwaukee

Tulsa

Worcester

Source: Moody’s Analytics
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Multifamily Economic and Market Commentary

As a result of increased new construction, many oversupplied metros may find that their average multifamily vacancy 

rates are going to stay higher longer. In taking a closer look at some of these metros, although the amount of new 

supply tends to decline over the next five years, as seen in the charts below, the vacancy rates stay relatively elevated. 

For example, according to third quarter 2023 projections from CoStar, despite Austin’s new construction pipeline 

declining to just under 2% of its multifamily inventory by 2028, its vacancy rate is expected to be 10% that same year, 

well above the metro’s long-term average of 8.5%. Similarly, CoStar believes that Nashville is also poised to see a 

higher-than-average vacancy rate of nearly 10% by 2028 compared to its long-term average of 6.8%. 

In contrast, Phoenix is likely returning to its long-term average vacancy rate due to all its new supply. With its new 

construction pipeline falling to an estimated 1.3% of inventory by 2028, CoStar is expecting the metro’s vacancy rate 

to be about 9%, which is only slightly above its long-term average of 8.7%. Midland-Odessa is in a similar position, 

with its vacancy rate expected to be an estimated 8.8% by 2028, which is only slightly higher than its long-term 

average of 8.5%.

Some Metros May See Higher Than Average Vacancy Rates for Awhile

Source: Moody’s Analytics

0%

2%

4%

6%

8%

10%

Austin Colorado

Springs

Nashville Phoenix Salt Lake City San Antonio Midland/Odessa

0%

5%

10%

15%

20%

25%

30%

Austin Colorado Springs Nashville Phoenix Salt Lake City San Antonio Midland/Odessa

2020 2021 2022 2023 2024 2025 2026 2027 2028

2000-2022 Avg. Vac. Rate:

8.5% 7.9% 6.8% 8.7% 7.2% 8.9% 8.5%

Units Completed By Year (% of Market Inventory) – Select Markets

Historical and Forecasted Vacancy Rates – Select Markets

Source: CoStar, Q3 2023
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We continue to maintain a cautious outlook for the national multifamily sector in 2024. We expect the multifamily 

sector will see a further softening in demand this year, possibly resulting in negative rent growth during the first 

quarter of 2024 due to new supply entering the market, especially during what is normally a slow lease-up time of the 

year, as well as again during the fourth quarter due to the additional stressor of expected slower job growth. 

At a metro level, demand will vary. In some metros, especially those with a large amount of supply expected to come 

online during the year, we believe rents could remain flat to negative much of the year, in turn pushing up concession 

rates as well as the number of units offering them, but that is likely to be at a localized, submarket level. In other 

undersupplied metros, rent growth is expected to be positive but will not be at sufficient enough levels to dramatically 

alter the overall national outlook. 

As a result, we expect multifamily origination volume levels will remain subdued. As of October 2023, the Mortgage 

Bankers Association is estimating that multifamily originations volume will be $285 billion in 2023 and $339 billion in 

2024, but that is subject to change. Based on current trends, our estimated annual multifamily originations are in the 

same general range, albeit slightly lower: $255 billion to $275 billion in 2023 and $295 to $325 billion in 2024. 

It is important to note that Fannie Mae expects economic growth to slow in 2024 and the risk of recession remains 

elevated. We expect the multifamily rental market to see continued softness in demand from both tenants and 

investors, and a return to more normalized trends is not anticipated until mid-2025. 

Higher interest rates dampened investor appetite for purchasing commercial real estate properties in 2023, and 

multifamily properties were no exception. Sales of U.S. multifamily properties plummeted last year, totaling just an 

estimated $105.5 billion year to date through November 2023 for properties valued at $2.5 million or higher, according to 

data from MSCI Real Assets.

As expected, November's average cap rate was estimated at 5.36%, which was up slightly from 5.32% in October and up 

quite a bit from 4.82% as of November 2022, according to data from MSCI Real Assets and as seen in the chart below. We 

anticipate that cap rates could inch up higher this coming year, perhaps climbing to as high as 5.75% before declining 

back to between 5.5% and 5.25% over the next 12 to 18 months, in response to any interest rate reductions. 

Multifamily Economic and Market Commentary

2024 Multifamily Outlook: Skies Remain Cloudy 

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Treasury Interest Rates and Multifamily Capitalization Rates

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

Multifamily Property Sales Volume Expected to Remain Subdued in 2024

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 2024

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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