Robust Multifamily Demand Keeps Vacancy Low

  • The overall multifamily vacancy rate fell to 4.1% in Q4, down 40 basis points year-over-year and the lowest Q4 level since 2000.
  • Average rent increased by 2.6% year-over-year, slightly down from the growth rates of Q3 and a year ago but still relatively favorable and on par with the historical average of 2.6%.
  • Development remained active in Q4 with 71,600 units delivered, slightly above the four-year quarterly average of 66,800 units. The 254,600-unit total for 2019 was down 7.0% from 2018. However, the construction pipeline remains near peak levels and indicates no slowdown in completions until at least 2021.
  • Net absorption continued to outpace completions in 2019 when 299,400 units were absorbed. High multifamily demand remains sustained by economic expansion, the tight labor market, mostly favorable demographics, limited availability of moderately priced housing and several lifestyle trends favoring urban apartment living and a preference for renting versus owning.
  • Phoenix had the highest year-over-year rent growth (8.0%) among major markets. Other major markets with notable gains were Las Vegas (5.8%), Nashville (5.4%), Sacramento (4.8%), Raleigh (4.6%), Charlotte (4.5%) and Austin (4.2%).
  • Healthy market conditions continued to attract both investment and financing. Investment totaled $50.5 billion in Q4, down 6.0% year-over-year. However, full-year 2019 investment volume rose by 4.4% to $184 billion—the highest annual volume since Real Capital Analytics (RCA) began tracking multifamily investment in 2001.
  • Capital remained widely available for multifamily borrowers in 2019. Fannie Mae’s and Freddie Mac’s new multifamily loan production reached a record $149 billion. Mortgage rates edged down in Q4 to an average of 3.8%.