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United States Multifamily Capital Markets Report

August 2020

Newmark presents the Second Quarter 2020 United States Multifamily Capital Markets Report.

Sales Volume

Sales volume totaled $13.9 billion in 2Q20, representing a 70.4% year-over-year decline compared with 2Q19. While transactions slowed considerably as a result of the COVID-19 pandemic, multifamily has been the top recipient of capital year-to-date. Sales volume averaged $4.6 billion per month in 2Q20, the lowest monthly average since 2Q11.

Rent Collections

Multifamily has been the top performing property type for rent collections since the onset of COVID-19 and the only property type to exceed 90% rent collections each month since April. Rent collections fared best in 2Q20 in lower-cost, higher growth non-major markets such as Austin, Denver, Sacramento, Salt Lake City and San Diego.

Total Returns

Annual total returns for multifamily decreased to 2.98% in 2Q20 as appreciation was negative for the first time since 2009. The income component of total returns remains durable at 4.23%, just 6 basis points below 2019 levels. Performance in the Southeast has outpaced the broader US multifamily total returns index on a short and long-term basis.

Rent Growth

Over the past 12 months, annual effective rent growth fell to 2.1%, caused by a 150 basis point drop in 2Q20 compared with 1Q20. On a quarterly basis, rent growth dropped to -1.0% due to COVID-19. Rental growth over the past 12 months remains strongest in Sunbelt markets lead by Phoenix at 6.7%.

Supply and Demand

Over the past 12 months, 303,650 units were delivered nationally compared to 177,007 units absorbed. The largest markets in Texas (Austin, Dallas, Houston and San Antonio) account for 17.9% of deliveries nationally over the past year.

Debt Markets

Total mortgage debt outstanding for the multifamily sector rose to $1.6 billion for the quarter, an increase of 1.8% quarter-over-quarter. Total originations by Fannie Mae and Freddie Mac rose to $39.8 billion in 2Q20 as the market stabilized, in part, due to Federal Reserve policy.