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United States Multifamily Capital Markets Report

United States Multifamily Capital Markets Report

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3Q 2024

Newmark presents the Third Quarter 2024 United States Multifamily Capital Markets Report.

Year-over-year, the spread between homeownership and rental costs increased 7.6%, reaching $1,203 in the third quarter of 2024. Elevated by record-high interest rates, renting remains notably more cost-effective than homeownership.
The 30-year fixed-rate mortgage average in the United States is 52.8% higher than the effective interest rate on mortgage debt outstanding as of the third quarter of 2024. This substantial gap makes a significant increase in home sales unlikely until the spread narrows.
Quarterly demand reached 192,649 units in the third quarter of 2024, marking a 134.6% year-over-year increase and exceeding the third-quarter long-term average by 117.3%. Rolling four-quarter demand rose to 488,773 units, continuing its acceleration for six consecutive quarters.
A total of 162,595 units were delivered in the third quarter of 2024, surpassing the previous record of 149,896 units set in the second quarter of 2024. New deliveries are projected to decelerate slightly through the fourth quarter of 2024, with a more significant slowdown anticipated in 2025 and 2026.
As of the third quarter of 2024, annual demand exceeded new supply in 48 of the top 50 U.S. markets. This represents the fourth consecutive quarter in which at least 47 of the top 50 markets saw demand outpace supply.
After reaching a peak of 5.9% in the first quarter of 2024, the national vacancy rate declined by 30 basis points to 5.6%, driven by strong demand in the third quarter of 2024. Although the current rate is 10 basis points higher than a year ago, vacancy levels appear to have stabilized.
Debt origination activity in the first half of 2024 remained subdued, but third-quarter loan volume marked its strongest performance since 2022, with year-to-date volume up 8.5%. Borrowers benefited from declining rates throughout the quarter; however, with rates trending back up, it is uncertain if this momentum will continue.
GSEs and banks continue to be the largest lenders, despite originations declining 13% and 23% year over year, respectively. Other lenders have stepped in to fill the gap, with financial firms, CMBS, insurance, and other sources more than compensating for the shortfall in bank and GSE lending.
Sales volume totaled $35.8 billion in the third quarter of 2023, increasing 9.3% year-over-year. Additionally, multifamily holds the largest share of investment sales among all U.S. commercial real estate property types at 34.9% through the third quarter of 2024.
As of the third quarter of 2024, cap rates for transactions of $5 million and above averaged 5.7%, compared to an average interest rate of 5.2%, resulting in positive leverage of 49 basis points. This marks the third consecutive quarter transactions are in positive leverage.
Dry powder at closed-end funds is down 11.7% from its December 2022 peak, reflecting declines in dry powder across value-add, opportunistic, and debt funds. Similarly, new fundraising has dropped from $213 billion in 2022 to $132.5 billion over the past 12 months.