- Increasing 5.9% from the third quarter of 2023, the spread between homeownership and rental costs grew to $1,066 in the fourth quarter of 2023. Driven by an increase in home prices and record-level interest rates, renting continues to be significantly more economical than owning a home.
- Following a below-average year for demand in 2022, demand was robust in 2023. 58,200 units were absorbed in the fourth quarter of 2023, totaling 233,741 units for the full year. On a nominal basis, markets throughout the South dominated the top markets for absorption, led by Houston, Phoenix and Austin.
- Despite nearly 440,000 units delivered in 2023, new supply is anticipated to surge 53% year over year in 2024; however, the high cost of capital and limited financing available for new construction will keep new supply in check in the coming years, with a 42% deceleration in new supply projected in 2025.
- Quarterly rents declined 1.3% in the fourth quarter of 2023, while year-over-year growth increased 0.2%. Annualized rent growth has declined for seven consecutive quarters. Midwest and Northeast markets now occupy the top markets for rent growth, led by Cincinnati and Chicago, at 3.6%.
- Multifamily expenses increased 7.7% year-over-year, led by a 33.5% surge in insurance costs, putting added pressure on operations. Insurance has increased for four consecutive quarters.
- Price dislocation and an elevated interest rate environment continue to hinder the investment sales market, as evidenced by the 50.0% year-over-year decline to $26.9 billion in quarterly sales volume and 61.1% decrease annually. Multifamily remains the largest share of investment sales of all US commercial real estate property types, at 31.8% in 2023. There is growing optimism that rate cuts will spur activity in the second half of the year.
- - Dallas and Atlanta were the top recipients of capital for the third consecutive year. Of the top 25 markets for sales volume, only San Francisco experienced a year-over-year increase of 12.2%.
- Year over year, vacancies rose 92 basis points to 5.8% nationally. The current vacancy rate surpassed its highest rate during the first quarter of 2014.
- Multifamily debt origination declined 52% year over year in 2023, with weakness persisting through the fourth quarter of 2023. While originations were down across lender groups, the GSEs and, to a lesser extent, life insurance companies were relative bright spots.
- 36% of upcoming securitized multifamily debt maturities had a DSCR of 1.25x, per their most recent financials, compared with only 23% with a DSCR of 2.0x or greater. These maturities will struggle to refinance even before taking valuation concerns into account. The maturing loans are biased towards CRE CLO loans, which include higher shares of transitional, floating-rate debt. This is a bad proxy for insurance and GSE lending, but a great proxy for debt funds and a significant share of bank lending.
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United States Multifamily Capital Markets Report
4Q 2023
Newmark presents the Fourth Quarter 2023 United States Multifamily Capital Markets Report.