Multifamily has some challenging times in 2024 — depending on where you are and how you approach it.

Apartment List has a list of predictions for the 2024 rental market. But they’re easier to understand in a bigger context, that of the mix of challenges and benefits facing multifamily professionals.

The big questions for 2024 are what property valuations might be, the future for rent growth, and strong price discovery. The basic dynamics are demand and supply, but each of those faces complications.

As Apartment List noted, nearly one million apartment units are currently under construction, with completions expected to peak in 2024, “the most new apartments in decades.”

“With so many units in the construction pipeline, 2024 should be the strongest year for new multifamily supply since the 1980s,” they wrote. “In 2024, multifamily operators should brace for swelling competition from new inventory, and renters should expect to find more options when searching for their next home.”

GlobeSt.com has heard similar projections from industry sources since earlier in 2023 and the concerns that a rapid increase in inventory will drive up vacancy rates and push down rents.

Apartment List expects 2024 to be a year of low single-digit rent growth. “2023 is set to have the second slowest rent growth of any year in the history of our estimates (going back to 2017), coming ahead of only 2020,” they wrote. “Looking ahead to 2024, we expect demand to bounce back slightly, but remain on the soft side.”

There are three dynamics at work here. One, there is an increase in the number of households most recently running about 1.5% year over year. Two, the labor market remains strong, although there are signs that it is slowing. And three, the cost of houses combined with 30-year mortgage rates that are still around 7.3% pushing more people into long-term renting. However, affordability continues to be a major concern and sentiment data shows that Americans still lack confidence in the economy.

But it’s important to remember that averages don’t ultimately matter because markets are ultimately local. Across the Sun Belt, as Apartment List noted, there are more renters because of population shifts. “But in many cases, Sun Belt markets have also been among the most accommodating of growth, allowing for new housing development to meet the growing demand,” they wrote. In other words, market conditions vary by location and with more supply comes lower prices.