The multifamily market is beginning to see light at the end of the tunnel as deliveries slow and rent growth begins to show signs of recovery — albeit slowly.
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As multifamily overcomes a supply overhang, quarter-over-quarter rent growth reached 0.3%. While relatively flat, it marked the first third-quarter increase in four years. Rents ticked up 1.4% in the first three quarters, according to Yardi Matrix.
“Fundamentals may be stabilizing after several years of supply-driven weakness,” according to the Yardi Matrix report. “Improving market breadth, slowing supply growth and resilient occupancy suggest multifamily is entering the fourth quarter on firmer footing.”
The strongest year-over-year fundamentals were recorded in gateway and Midwest markets, led by San Francisco’s nearly 10% growth and followed by New York City, Chicago, Kansas City and Detroit, which are all hovering around 5% growth.
Meanwhile, Sun Belt markets are still wrestling with higher supply waves but are “becoming less negative” as deliveries slow, according to the report. Metros like Miami, Atlanta and Los Angeles are hovering below 1%, and Denver, Houston and Austin are nearing negative 3%.
Rents remaining near current levels through the year could result in “meaningful improvement from recent years,” according to Yardi Matrix.
Developers finished 318,000 units in the year ending in the third quarter, a 46% drop from the more than 588,000-unit peak of late 2024. The demand-supply gap has narrowed to 13,000 units, the fewest in more than a decade, according to a Q3 RealPage report.
Even while market fundamentals improve, outside economic factors are dampening the sector's comeback for investors and apartment owners after the 10-year Treasury yield climbed above 5%, the highest level since 2022.
Economic volatility could cause refinancing costs to rise and transaction activity to slow, according to Yardi Matrix.
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