Insights>
Market Report Page >
United States Multifamily Capital Markets Report

United States Multifamily Capital Markets Report

1Q 2024

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

The spread between homeownership and apartments rental costs grew to $824 in the first quarter of 2024, increasing 18.4% year over year. Simultaneously, mortgage applications for home purchases have declined to a near-14-year low, and active listings remain well below pre-pandemic levels.
Foreign-born workers have been a catalyst for labor force growth of late and can be credited for multifamily demand, given their propensity to be renters. As of the latest census data, 55% of the foreign-born population were renters, as opposed to just 42% of native-born population. The share is even higher for recent immigrants; those who immigrated between 2018 and 2022 have an average renter rate of 68%.
Demand surged in the first quarter of 2024 with 103,826 units absorbed, representing the largest first quarter total since 2000, as well as outpacing the long-term first-quarter average of 38,005 units by 2.7x. Additionally, rolling four-quarter demand accelerated to 317,241 units, the highest level since the second quarter of 2022.
New supply continues to break records as 135,652 units were delivered in the first quarter of 2024, breaking the previous largest quarterly sum in the fourth quarter of 2023. New deliveries are expected to continue to accelerate in the second and third quarters of 2024, before decelerating in the fourth quarter of 2024, where a reversion to the mean is expected. Based on annual average absorption, several Sun Belt markets with robust pipelines of new deliveries in 2024 are expected to take upwards of two to three years to absorb.
Year over year, vacancies rose 66 basis points to 5.9% nationally. This is the ninth consecutive quarterly increase in vacancy; however, the pace of growth is slowing on an annualized basis. Meanwhile, quarterly rent growth declined to negative 0.1% in the first quarter of 2024, while year-over-year growth remained flat at 0.2% for the second quarter consecutively. Rent growth is projected to increase throughout 2024, reaching 2.0% year over year as new supply is set to slow in the second half of the year.
Multifamily debt originations declined to the lowest level since 2015. While recent activity has been lackluster compared to pre-pandemic levels, originations in the first quarter of 2024 were down just 7% year over year, suggesting that activity may be close to bottoming. Additionally, $669 billion in multifamily loans mature between 2024 and 2026.
Investment sales volume totaled $20.6 billion in the first quarter of 2024, decreasing 25.3% year over year. Sales volume on a rolling four-quarter basis declined to $113.0 billion, the lowest point since the fourth quarter of 2014 and 42.2% below the long-term average; however, multifamily remains the largest share of investment sales of all US commercial real estate property types at 26.2% through the first quarter of 2024.
As of the first quarter of 2024, the spread between major markets and nonmajor market cap rates totaled 25 basis points, 69.1% below the long-term average of 80 basis points. The market is pricing nonmajor markets with lower barriers to entry, favorable demographics and strong demand fully compared with major markets, which are more supply constrained.
Multifamily expenses increased 6.5% year over year, led by a 36.1% surge in insurance costs. The first quarter of 2024 represents the seventh consecutive quarter on a year-over-year basis, with double-digit increases in insurance expenses.