Copyright© 2015 Fannie Mae 1

Multifamily Market Commentary – September 2015

Millennials Flocking to Other Primary Metros

Although there are more than an estimated 500,000 new apartment rental units under construction in the U.S., construction 

is not evenly distributed across the country. The majority of apartment rental units underway tend to be concentrated in 

major metro areas like New York, Washington, D.C., and Los Angeles. There are also a number of smaller primary metros 

such as Austin, Dallas, Houston, Seattle, and Raleigh that have experienced a combination of increased demand and new 

supply, due in large part to improving multifamily fundamentals such as shifting demographics, a surge in job growth, and 

positive net migration.

The Texas metros, as well as Seattle and Raleigh, have been able to attract an above average percentage of job-seeking 

Millennials. As a result, these metros have anywhere from 20 percent to 25 percent of their total population concentrated in 

the 20-to-34-year-old cohort, which is the primary age group most likely to rent apartments. And while all of these metros 

are fairly well diversified in their employment bases, they have been able to also draw – and more importantly retain – top 

notch employers, thereby creating a haven for young, educated, well-paid workers. This has created a trifecta of solid 

fundamentals for the multifamily sector in each of these metros: Job growth, demographics, and rental housing demand.

Major Economic Drivers, Lower Renting Costs

Austin, Dallas, Seattle, and Raleigh all boast the high tech sector as one of their major economic drivers. Houston, on 

the other hand, relies more heavily on manufacturing, logistics, healthcare, and, of course, the energy sector as the fuel for 

its economic engine. 

What all of these metros have in common is that they tend to offer well-paying jobs coupled with, in the Texas metros and 

Raleigh, a lower-than-average cost of renting an apartment, as illustrated in the table below – a win-win for cash-strapped 

Millennials. 

 

Source: Nielsen PopFacts, Fannie Mae Multifamily Economics and Market Research estimates

Houston: A More Uncertain Road Ahead

Houston appears to be in the midst of an economic slowdown but, more importantly, not a downturn. While the metro’s 

economy has greatly diversified over the past two decades, it is still driven by the energy sector, specifically oil and gas.

Prior to the recent slide in oil prices, Houston was in a robust expansion. The metro added more than 100,000 jobs in 2014, 

growing 4.4 percent annually compared to 2.0 percent nationally. That rate of growth is not likely going to be repeated this 

year. In fact, Houston’s unemployment rate rose slightly to 4.7 percent in July 2015, but that is still well below the national 

average of 5.1 percent, as of August 2015. 

Age 18-34 % of Pop. Q1 2015 Rent Level Q1 2015 Vacancy Rate

Austin 26.8% $1,050 5.50%

Dallas - Ft. Worth 23.6% $950 4.75%

Houston 24.1% $895 7.50%

Seattle 23.7% $1,290 4.25%

Raleigh-Durham 24.0% $880 6.75%

National 23.2% $1,145 5.00%
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As a result, Houston's apartment market is likely poised for a period of easing. Vacancies are now at an estimated 7.5

percent, down from an estimated 11.5 percent in 2010, but are expected to move upward due to new upcoming supply and 

the weaker job market. There are an estimated 20,000 apartment rental units underway, most of which are expected to 

come online this year – just as job growth has slowed. Indeed, Moody’s Analytics is projecting job growth could be 1.9 

percent this year and 1.7 percent in 2016. While the metro is not as dependent on oil as it once was, much of the exceptional 

recent growth in the area can be tied back to demand from the energy sector. Instead, it is likely to be the healthcare and 

education sectors that should help lead short-term future job growth in Houston. 

Dallas: More High-Tech, Less Energy Reliance

The Dallas-Fort Worth metro is in full-blown expansion driven by healthy fundamentals, strong net migration trends, a 

diversified economy, and above average job growth. The metro’s job growth was an enviable 4.0 percent last year. The 

financial services sector is a positive presence within the metro, as well as the professional, transportation, and hospitality 

services sectors. 

Apartment supply in the Dallas-Fort Worth metro area is expected to continue to thrive over the short term, with more than 

14,000 units underway. In fact, the robust growth in new supply should not present much of an issue. The prime renter 

cohort is expected to expand by 9.0 percent over the next few years. The combination of a relatively young demographic, 

a healthy economy, and strong job growth is likely to continue to keep rental housing demand high through 2017.

Austin: High Tech is in the Driver’s Seat

Austin is nearing full employment. Jobs grew at a rate of 4.2 percent last year, well above the national rate, and 

unemployment remains well below the national rate. Austin is likely on track to add more than 50,000 new jobs over the 

next three years. Healthy job growth and economic fundamentals are being reflected in continuing strong multifamily 

fundamentals – for now. At an estimated 5.5 percent, multifamily vacancies are still low and concessions are virtually nonexistent. However, an estimated 15,200 units are underway – quite a bit for a metro with an inventory of fewer than 200,000 

multifamily units.

Exceptional job growth over the next five years is expected to continue bringing new residents – who will need housing – to 

Austin. In addition, Austin is home to seven colleges and universities, including the flagship University of Texas. Many local 

college students choose to call the metro home after graduation, giving it the largest 20-34 year-old cohort in the nation at 

nearly 27.0 percent compared to the national average of 23.0 percent. 

Nevertheless, with nearly 13,000 units set to deliver this year alone, even with strong job growth vacancies will likely trend 

up. A substantial increase in supply is expected in the South and Downtown submarkets, and the expectation is that local 

vacancy levels will climb. However, given that Austin started 2015 with a vacancy rate at slightly more than 5.0 percent, the

multifamily sector here is expected to hold steady into 2016.

Raleigh: No Brain Drain Here

Raleigh is another metro that draws upon its local universities to attract and retain its highly educated workforce. Jobs grew 

at more than 3.0 percent last year, well above the national average. More importantly, it is expected that the Raleigh/Durham 

metro could see an additional 25,000 new jobs this year. In addition, Raleigh’s population is forecasted to grow at a steady 

pace of more than 2.0 percent annually over the next 18 months.

The metro’s good economic fundamentals have not gone unnoticed by multifamily developers. A substantial amount of new 

rentals – more than 8,000 units – were delivered in 2014, with another 5,500 expected to complete and come online this 

year. However, given the historically low vacancy rates, Raleigh’s rental market conditions eased late last year, rather than 

softening substantially. Despite the amount of new supply expected, anticipated steady job growth is likely to keep the rental 

market stable over the short-term.
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Seattle: An Affordable Alternative

Seattle continues to be one of the better performing metros throughout the country. Since 2010, Seattle’s job market has 

expanded by more than 7.0 percent, besting the national rate by 2.0 percent during the same timeframe. Positive 

demographic trends are expected to continue with an anticipated average annual population growth rate of about 1.3 percent 

over the next four years.

Positive job growth and a high level of positive net migration are continuing to fuel demand within the multifamily rental 

sector here. Even so, there is a significant amount of new supply coming online with an estimated 15,000 units underway 

and expected to deliver over the next 12 months.

With its high-paying jobs and unique quality of life, Seattle continues to attract new residents, especially those in the 20-34 

year-old cohort. Seattle has one of the highest concentrations of high-tech employers in the nation. Major tech firms such 

as Google, Amazon, Microsoft, and eBay are establishing an even larger presence there. As a result, rental market 

fundamentals have continued to improve.

Estimated vacancies are at 4.25 percent as of first quarter 2015, significantly below its 8.0 percent cyclical peak in 2010. 

Rent growth was estimated at 1.0 percent last quarter and concessions were nearly non-existent, continuing the apartment 

market’s trend of healthy growth.

Seattle remains the far more affordable alternative to other West Coast high-tech metros, such as San Francisco and San 

Jose. Over the next five years, Seattle’s multifamily rental sector is expected to be supported by above-average positive 

net migration trends, elevated levels of intellectual capital, and the lack of single-family affordability in the metro.

Apartment Demand Should Keep On Keeping On

Underlying multifamily fundamentals at a national level remain stable. While some submarkets are seeing a slowdown in 

rent growth and an increase in vacancy levels due to new supply, it is not expected to be long-lasting. This is because

projected employment growth coupled with solid demographic trends in most metros – and especially in most of the Texas 

metros, Seattle, and Raleigh – are expected to keep rental household formations healthy over the next few years.

Kim Betancourt

Director of Economics

Tanya Zahalak

Senior Economist

Multifamily Economics and Market Research

September 2015

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 of 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.