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United States Multifamily Capital Markets Report

United States Multifamily Capital Markets Report

2Q 2024

Newmark presents the Second Quarter 2024 United States Multifamily Capital Markets Report.

Increasing 26.7% year over year, the spread between homeownership and rental costs grew to $1,114 in the second quarter of 2024, while MBA’s Mortgage Application Index decreased 48.8% since the Fed’s initial rate hike in March 2022.
Quarterly demand totaled 161,707 units in the second quarter of 2024, representing a 102.0% year-over-year surge. Rolling four-quarter demand accelerated to 389,629 units, which has improved for five consecutive quarters. Sun Belt markets within the top 50 markets nationally averaged demand 64.4% greater than the long-term average from 2014 to 2023.
Breaking the previous largest quarterly sum on record of 126,591 in the first quarter of 2024, 157,052 units were delivered in the second quarter of 2024. New deliveries are expected to continue to accelerate in the third and fourth quarters of 2024, before decelerating in the first quarter of 2025.
Quarterly rent growth rose to 1.1% in the second quarter of 2024, while year-over-year growth remained flat at 0.2% for the third quarter consecutively. Year-over-year rent growth is projected to increase throughout the second half of 2024 and throughout 2025 as new supply fears lessen.
$669 billion in multifamily loans mature between 2024 and 2026, with banks accounting for 46% of maturities between 2024 and 2026. GSEs and banks remain the largest lenders, despite originations declining 32% and 22% year over year, respectively. CMBS has been a bright spot, with a 167% year-over-year surge in the first quarter of 2024.
Sales volume rose to $38.8 billion in the second quarter of 2024, representing a 20.4% year-over-year increase in volume as a flurry of portfolio and entity-level transactions closed throughout the quarter. This also signifies the first sequential positive year-over-year change in volumes since the second quarter of 2022.
The spread between top quartile cap rates totaled 26 basis points, 67.8% below the long-term average of 80 basis points. The market is pricing non-major markets with lower barriers to entry, favorable demographics and strong demand compared with major markets, which are more supply constrained.
Dry powder at closed-end funds is 10.3% below its December 2022 peak, reflecting declines in dry powder at value-add and opportunistic funds. Fundraising in the second quarter of 2024 ($29.1 billion) increased 31% quarter over quarter. Even more notably, the number of funds raising capital (139) rose sharply to the highest level since the fourth quarter of 2022 (169).
Across all residential subtypes and expanded subtypes, total returns over the past 12 months were lower than the 2022-to-2023 average; however, both manufactured and student housing have been bright spots, which may explain why investors have increased allocations to nonconventional in recent years.
As of the second quarter of 2024, total expenses increased 5.1% year over year; however, this marks the fourth consecutive decline in total expenses after peaking one year prior. Most notably, insurance growth declined to 26.0% in the second quarter of 2024, compared with 36.1% in the first quarter of 2024.