The PNC Real Estate Multifamily Market Report for the first quarter of 2024 shows that demand for housing is strong but falling short of supply, and that rent growth nationally is flat.

Executive Summary:

  • Employment: Job growth slowed throughout 2023, but remains resilient and stronger than expected. Payrolls should slow further throughout 2024. The unemployment rate edged higher at 3.8% as of March 2024, up only 30 basis points (bps) from 3.5% from a year ago. 
  • Vacancy: Construction levels are at a 50-year peak and have moved vacancy higher. Stabilized apartment vacancy rates averaged 5.8% in the first quarter of 2024, up from 5.2% a year ago. Because of the surging number of completions expected in 2024, PNC expects the vacancy rate to remain above the historic average, ticking up potentially by another 20 bps before moving back down to 5.0-5.5% nationally over the long term.
  • Supply: Peak supply is now available, with almost one million units currently underway nationally, concentrated in the South and Southeast. About 430,000 units delivered in 2023, and another 660,000 units are expected to deliver in 2024. Slowing permits and starts numbers are pointing to much lower completions in 2025 and 2026.
  • Demand: Net absorption was strong in 2023 and the 223,000 total for the year was in line with the 20-year historic average. Further, the first quarter of 2024 marked the highest first quarter absorption since 2000, at 104,000 units. Demand for apartments should remain strong, given healthy population growth, cooling inflation, and a resilient job market. Nevertheless, demand is expected to lag supply in the face of record deliveries in 2024.
  • Rent Growth: After double digit gains in 2022, and a cumulative five-year gain of 30.8%, rents are flat on a national basis. Generally, rents are growing in low-supplied markets and falling in high-supplied markets, averaging out nationally to zero. Annual effective rent growth for market rate apartments averaged 0.4% in the first quarter of 2024. PNC expects modest rent growth for 2024 (1.0-2.0% on an annual basis) based on the impact of new construction and slowing job growth.
  • Cap Rates/Sales Trends: Apartment cap rates again rose in the first quarter of the year, averaging 5.8%, a 4 bps rise from the previous quarter and 54 bps higher from a year ago. Apartment Commercial Property Price Index (CPPI) declined by 8.4% year-over-year. Sales activity in the first quarter of 2024 remains at a low level of $20.6 billion, an annual drop of 25%.

Read the Full Report:

Multifamily Market Report First Quarter 2024

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