T
he US multifamily market is showing signs of recovery, with the vacancy rate falling in Q3 2024 for the first time in over two years. The rate dropped 0.2% quarter-over-quarter to 5.3%, driven by strong renter demand and a dwindling supply pipeline. This trend is expected to continue, pushing the vacancy rate down to its long-run average of 5.0%.
Positive net absorption of 153,300 units was one of the strongest third quarters since 1985, with quarterly demand outpacing new completions for the second consecutive quarter. Average monthly rents rose 0.3% in Q3 2024 to $2,203, and are expected to accelerate as construction completions slow.
A record 473,300 new units have been delivered over the past four quarters, but construction starts have slowed significantly, indicating an easing of supply pressure in coming years. According to Kelli Carhart, leader of Multifamily Capital Markets for CBRE, "The first drop in vacant units in more than two years signals a crucial turning point in the multifamily sector."
Regional highlights include:
* The Midwest led year-over-year rent growth with 2.7%, followed by the Northeast (2.3%) and Pacific (0.2%).
* Rents fell in the Southeast, South Central, and Mountain regions.
* Nearly all markets tracked by CBRE recorded positive net absorption in Q3 2024, with New York, Washington D.C., and Houston leading the way.
Fifty markets saw net absorption exceed new supply in Q3 2024, up from 45 in Q2 2024 and 24 in Q4 2023. Vacancy rates declined in 50 markets quarter-over-quarter in Q3 2024, a significant increase from 43 markets in Q2 2024.
