Multifamily to Thrive in 2024, Based on Positive Fundamentals

During the past year, the multifamily sector highlights include increased renter demand, abundant supply, and slowing rent growth. Origin Investment’s “Top 10 2024 Predictions for Multifamily Real Estate” and Apartment List’s “7 Predictions for the 2024 Rental Market” suggest strong fundamentals for multifamily in the coming year.

The specific forecasts are as follows:

Growth of long-term renters

Increasing mortgage rates and home prices create the ideal situation for long-term renters. Origin Investments noted that “the price discrepancy between buying and renting is at its most extreme since 1996.” Origin Investments Co-CEO David Scherer added that the current housing situation is “bad for potential homebuyers, but good for multifamily investors.”

Apartment List analysts agreed, noting that “few prospective buyers can afford to buy in today’s market,” with current homeowners locked into low mortgage rates not wanting to sell. “As a result, many families remain renters longer than they may have in the past,” Apartment List commented.

New deliveries in 2024 – and a construction halt

Apartment List explained that the number of new multifamily units under construction hit one million, with completions and deliveries anticipated to peak in 2024. But Origin Investments sounded the “caution gong” on this, forecasting that new development will come to a standstill due to a lack of real estate lending and a “potential rise in defaults on expiring debt, among other uncertainties.”

Rent Growth stabilization

This past year saw negative rent growth due to unit deliveries. But rent growth will likely end up in positive territory in 2024. Apartment List forecasts low single-digit rent growth in the coming year amid the supply coming online. Origin Investments also forecasts single-digit rent growth in the 2% to 4% range by the end of 2024, similar to 2022.

Additional predictions

Hybrid workers will impact multifamily. While many companies initiated back-to-work mandates in 2023, many employees continue working from home part-time. Hybrid workers mean more work-from-home space. Apartment List explained that demand for shared workspaces and extra bedrooms is increasing.

Increased distressed multifamily assets. Origin Investments noted that the combination of falling valuation and “an avalanche of variable-rate bridge loans coming due” will lead to investment opportunities. Those who have the means will be able to find “quality value-add multifamily assets in growing markets at or below replacement cost pricing” by Q3 2024, Origin Investments predicted.

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