1

Over the past decade, the U.S. multifamily sector has benefited from solid demand, increasing rent growth, 

and low vacancies, thanks to favorable demographic trends, ongoing job growth, and continued renter 

household formations. The same trends are expected to continue into the first year of the current decade. The 

biggest driver of multifamily demand has come primarily from the nation’s more than 80 million Millennials 

(those born between 1982 and 2000). They are the largest age cohort, outnumbering Generation Z (those born 

after 2000) and even Baby Boomers, according to the Census Bureau. Millennials, combined with Gen Z, the 

oldest of whom are starting to reach young adulthood, are expected to continue driving demand for housing, 

especially multifamily rental housing.

Looking to the coming year, we expect the national multifamily sector to stay the course, as fundamentals are 

expected to remain essentially the same. We expect the vacancy rate to increase slightly and rent growth to 

remain positive in 2020, similar to last year’s pace. 

Net Absorption Expected to Remain Positive 

Demand for multifamily rental units remained positive throughout 2019. Net absorption is estimated to have 

totaled about 317,000 units last year, according to data from CoStar, which is down compared to 2018’s 

estimated 366,000 units absorbed. Net absorption is expected to remain positive this year, although likely 

slowing to about 275,000 units, according to CoStar. Net absorption is expected to remain elevated earlier in 

the year and then slow down later in the second half, as seen in the chart above. 

Multifamily Economic and Market Commentary

JANUARY 2020

2020 Multifamily Market Outlook – Staying the Course 

5.4%

5.6%

5.8%

6.0%

6.2%

6.4%

6.6%

6.8%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2014 Q12014 Q32015 Q12015 Q32016 Q12016 Q32017 Q12017 Q32018 Q12018 Q32019 Q12019 Q32020 Q12020 Q32021 Q12021 Q32022 Q12022 Q32023 Q12023 Q32024 Q12024 Q3

Vacancy

Absorption & Net Delivered Units

Forecasted National Multifamily Trends

Absorption Net Deliveries Vacancy

Source: CoStar

© 2020 Fannie Mae
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Rent Growth Expected to Remain Stable

Rent growth was positive in 2019 and is estimated to have ended the year at about 2.5 percent – once again 

outpacing the rate of inflation, which was at 2.1 percent as of the end of November 2019. There has been 

above average rent growth since 2011, but only since 2017 has rent growth stayed below 3.0 percent. Our 

expectation for 2020 is that rent growth will once again be positive, though perhaps slightly lower than 2019, 

as we project it to be in the range of 2.0 percent to 2.5 percent. 

National multifamily concessions for all property classes (averaged across all units, including those not 

offering concessions) remain at low levels. Only about 15 percent of all multifamily units are offering 

concessions, according to data from RealPage, Inc. Class A concession levels remain higher than class B and C 

units, indicating that property owners are likely offering more generous concessions up front for newer class A 

units to lock in higher rent levels upon lease renewal. For those class A units offering concessions, the average 

concession rate as of November 2019 was 7.1 percent, which is slightly less than a month of free rent. It was 

approximately three weeks of free rent for those properties offering concessions on class B and C units, at 5.6 

percent and 5.5 percent, respectively, as of November 2019.

Multifamily Economic and Market Commentary

Not Much Change Expected in Vacancy

The national multifamily vacancy rate is expected to rise slightly in 2020, primarily due to the amount of new 

supply expected to complete and come online this year. Since much of this new supply is concentrated in a 

limited number of submarkets (only about 10 metros), it is possible that supply could outpace demand in 

some places this year. As a result, the national vacancy rate is expected to inch upward later in the year, as 

illustrated in the chart on the previous page. Despite an anticipated increase in the national vacancy rate, it is 

expected to remain low, due to demand stemming from anticipated positive job growth and favorable 

demographic projections. 

Fannie Mae is anticipating that the U.S. multifamily vacancy rate will remain in the 5.5 percent to 5.75 percent 

range during the early part of 2020 and could end the year near 6.0 percent. This would bring the national 

vacancy rate back to its recent historical average of 6.0 percent. 

© 2020 Fannie Mae
Multifamily Economic and Market Commentary

National class C rent growth in 2019 was estimated at 2.5 percent, according to RealPage, slightly lower than 

2.9 percent for class A and 3.0 percent for class B. It appears that although less expensive units remain in 

demand, there isn’t much room to push rents higher, as evidenced by class C’s lower concession rates and 3.9 

percent vacancy rate. As more new units deliver over the coming months, we expect the national concession 

rate to increase, albeit slightly. Class A concession rates may rise more dramatically for those metros with 

elevated levels of new deliveries in 2020.

National Multifamily Concession Rate by Class

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

A B C

Properties Offering Concessions

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2% A

B

C

All Property Average

Multifamily New Supply Could Peak in 2020

As seen in the chart on the following page, the amount of multifamily new construction remains elevated, with 

deliveries now expected by Dodge Data and Analytics to reach their peak of more than 476,000 units in 2020. 

However, we believe that number of completions to be unlikely, based on the ongoing scarcity of construction 

workers. According to the Associated General Contractors of America’s 2019 Workplace Results survey, more 

than 80 percent of firms surveyed stated that it was difficult filling all positions, both hourly and salaried, but 

with hourly craft workers being the most difficult to replace. We do not expect that trend to improve in 2020.

According to the Dodge Data & Analytics Supply Track, which distinguishes between multifamily properties 

consisting of either apartment or condominium units, about 396,000 apartment units were completed in 2017, 

making it the most recent peak year for new deliveries. About 377,000 units are estimated to have completed 

in 2019. The focus remains on rental: Condo completions recently peaked in 2018, with nearly 70,000 units, 

compared to only about 55,000 units in 2019. Dodge expects fewer than 50,000 condo units to be completed 

this year.

Source: RealPage

3 © 2020 Fannie Mae
Multifamily Economic and Market Commentary

Continued Multifamily Demand Expected

At a national level, we believe there is the potential for a slight supply/demand imbalance this year, based on 

the amount of new multifamily units expected to complete. Even though not all of the projected units are 

expected to actually deliver, the amount of expected job growth might not produce enough demand for all 

these new class A units. Job growth is expected to be 1.2 percent in 2020, according to Fannie Mae’s economic 

forecast, which should produce 1.8 million new jobs. Based on that amount of job growth, national 

multifamily rental demand could be between 300,000 and 360,000 units this year. 

As seen in the chart to the right, much of that new 

supply is expected to deliver earlier in the year, when 

job growth is expected to be more robust than later in 

the year. 

Nevertheless, much of the new supply consists of more 

expensive, class A units and is primarily concentrated 

in about 10 to 12 metros, as seen in the chart below, 

with much of it concentrated in only a few submarkets. 

The estimated amount of job growth, and its 

anticipated demand, differs widely from metro to 

metro, meaning that some metros are expected to 

experience more demand than others over the next 12 

to 18 months. 

0

20

40

60

80

100

120

140

160

Thousands

Apartments

Condos

Multifamily New Construction

Source: Dodge Data and Analytics

 -

 20

 40

 60

 80

 100

 120

Thousands

Beyond 2020

2019 2018

Source: DodgeData & Analytics, January 2020 – Metros with 6,000 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

4 © 2020 Fannie Mae
Multifamily Economic and Market Commentary

Supply and Demand Vary by Metro

Although the nation is expected to see positive job growth this year, it is not expected to be consistent 

everywhere, as illustrated in the two charts on the next page. Fannie Mae’s forecast for 2020 anticipates a 

national employment growth rate of 1.2 percent, but there are a number of metros that are expected to be 

below the national estimate, including Boston, Chicago, New York, and Philadelphia. These metros also 

happen to have a large amount of new multifamily rental supply on the horizon, as seen in the chart on the 

previous page. 

The New York metro is expecting the largest amount of new supply, with more than 59,000 units underway, of 

which nearly 40,000 units are expected to deliver this year alone. Based on Moody’s Analytics’ anticipated job 

growth rate of just 0.4 percent, conservatively the metro could produce demand for fewer than 10,000 rental 

units. Chicago has more than 10,000 multifamily units expected to come on line this year, yet job growth of 0.5 

percent could conservatively produce demand for fewer than 5,000 rental units. Although Philadelphia 

doesn’t have as much new supply underway as other metros, its projected below average job growth of just 

0.4 percent could produce demand for fewer than 1,000 rental units, despite more than 8,000 units expected 

in 2020 alone. 

Other Metros More in Balance...

Job growth in other metros is expected to fare better. Some Texas metros, such as Austin, Dallas, and 

Houston, are expected to surpass the national employment growth average. All three are expected to see job 

growth of 2.0 percent or higher, due to a continued expansion in the professional services, technology, 

healthcare, and transportation sectors. And while Austin and Dallas have elevated levels of new multifamily 

supply, the expectation of robust job growth should allow the multifamily sector to stay in balance over the 

course of the next 18 months. 

Austin’s new supply is anticipated at 14,000 units between now and 2021, but potential new demand is not 

expected to be that far behind at nearly 13,000 units. Dallas’s new supply appears elevated at more than 

18,000 multifamily units delivering this year, but with 2.4 percent job growth projected this year, demand 

could easily be as high as 15,000 rental units. More importantly, by 2021, Dallas could actually be 

undersupplied, if job growth projections remain on track.

5 © 2020 Fannie Mae
Multifamily Economic and Market Commentary

... And Some Need More Supply

Once again, Las Vegas is likely to be undersupplied. With Moody’s expecting job growth of 1.5 percent, there 

could be demand for more than 4,000 rental units, yet only about 2,500 multifamily units are expected to 

deliver in 2020. Even Riverside, with a renter household population of just 37 percent, is another metro that is 

likely to be undersupplied. With potential rental demand of between 6,000 and 7,000 units in 2020 (thanks to 

an expected job growth rate of nearly 1.9 percent), there are just 1,200 multifamily units expected to complete 

this year. 

Select Markets with Higher Expected 2020 

Employment Growth

Select Markets with Lower Expected 2020 Employment 

Growth

0.0% 1.0% 2.0%

FM National

Los Angeles

Miami

Seattle

Las Vegas

Dallas

Riverside

Houston

Orlando

Austin

0.0% 1.0% 2.0%

New Orleans

Detroit

Oklahoma City

New York

Cleveland

Philadelphia

Boston

Kansas City

Chicago

FM National

Source: Fannie Mae (National); Moody’s Analytics (Metros)

Multifamily Investors Remain Bullish

With interest rates staying low over the past few months, investors are likely even more enticed to focus on 

multifamily, keeping cap rates stable. Multifamily cap rates have remained in the mid- to low-5.0 percent 

range over the past two years due to the ongoing influx of capital flows and investor demand for properties. 

We expect these factors to continue into 2020. 

As a result of this anticipated investor interest, along with favorable fundamentals, investment in existing 

multifamily properties is expected to remain similar to 2019 levels. Although multifamily cap rates have 

remained at low levels – currently at about 5.4 percent, according to Real Capital Analytics – if the 10-Year 

Treasury Note yield declines any further, then cap rates would likely compress as well. But with our current 

economic forecast expecting the 10-Year to remain flat over the next 12 months, the expectation is that 

national multifamily cap rates are likely to remain low in 2020, staying well below 6.0 percent. 

0.0%

2.0%

4.0%

6.0%

8.0% 10-Year Treasury Cap Rate

Treasurys and Multifamily Capitalization Rates

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

6 © 2020 Fannie Mae
Multifamily Economic and Market Commentary

Rent Control Expansion Continues 

Recently, there have been a spate of rent control or rent stabilization laws passed, including in Oregon, New 

York, and California. These laws, whether at a state or local level, limit the amount of rent private property 

owners can charge in market rate rental housing, either through imposing a maximum rent amount or a 

percentage increase each year. 

As a result, the expansion of rent control measures in a number of states across the country may pose some 

challenges for the multifamily sector in the coming year. 

Some in the industry have raised concerns that rent control can actually cause pressure on market rents to 

increase and reduce the number of affordable units available for rent. Another factor is that rent control can 

cause developers to convert existing properties to condos, thereby leading to less available multifamily rental 

supply. Other concerns note that rent control laws can create a hesitancy for property owners to maintain 

their properties since the owners cannot always pass through the cost of improvements to the tenants 

through rent increases. Lastly, rent control expansion could end up leading to waning investor interest in 

multifamily properties in certain locations, as evidenced already in the change in focus of metros by investors. 

For example, according to a recent report from CBRE, the New York City metro area experienced a 9.2 percent 

year-over-year decline in multifamily investment during the first eight months of 2019, which some partly 

attribute to its expansion of rent stabilization. 

2020 Multifamily Outlook: Staying the Course

Our outlook for the multifamily sector in 2020 remains positive despite elevated levels of new construction. 

Based on anticipated investor demand, available liquidity, low interest rates, and construction projects whose 

loans should convert to permanent financing throughout the year, we expect 2020 multifamily mortgage 

origination volume levels to be higher than 2019. The Mortgage Bankers’ Association is anticipating 

multifamily originations volume will have reached $364 billion in 2019. It is even more optimistic with a 

forecast of $395 billion for 2020, which, as of this writing, does not appear unreasonable. For commercial real 

estate investors, as long as job growth holds up, multifamily is expected to remain a favored asset class in 

2020, leaving open the possibility for further cap rate compression, increased sales, and, in turn, higher 

origination levels. 

7 © 2020 Fannie Mae
Multifamily Economic and Market Commentary

Kim Betancourt

Director of Economics

Tim Komosa

Economist Manager

Multifamily Economics and Research

January 2020

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Multifamily Economics and 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.

8 © 2020 Fannie Mae