The multifamily housing market has been on a wild ride in recent years, with abrupt swings in demand, supply, and shifting renter preferences. As we head into 2024, the question on everyone’s mind is: Where is this rollercoaster headed next?
Key Trends Shaping the 2024 Multifamily Market
- 2024 will bring the most new apartments in decades. Construction data suggests multifamily supply growth should remain strong through 2024, with completions expected to peak that year. Developers are already responding to the higher interest rate environment, but the slowdown won’t be reflected in apartment completions until 2025.
- Expect low single-digit rent growth in 2024. Demand is likely to bounce back slightly but remain on the soft side. The labor market remains strong, but affordability continues to be a major concern. Rent growth will rise out of negative territory early next year but likely won’t exceed low single digits in 2024.
- The changing rent vs. buy math will create more long-term renters. Systemic barriers to homeownership will persist, causing many families to remain renters longer than in the past. Renting will increasingly be seen as the more practical housing option for many.
- Hybrid work will cement itself as the new norm for office jobs. With many homes continuing to serve double duty as workplaces, renters will have an increasing demand for spare bedrooms and shared workspaces within multifamily communities.
Navigating the Ups and Downs
To navigate the rollercoaster ride of the 2024 multifamily market, investors should:
- Carefully evaluate potential deals with strict criteria, stress-testing assumptions for low breakeven occupancy, relatively low leverage, high reserves, and strong management teams
- Be patient and wait for the best deals to hit the market, focusing on growing their investor base in the meantime
- Stay fastened for the entirety of the ride, embracing the ups and downs and trusting the process
By staying informed about the latest trends and adapting their strategies accordingly, multifamily investors can navigate the rollercoaster and come out on top in 2024 and beyond.
Conclusion
The multifamily market in 2024 is shaping up to be a true rollercoaster ride, with a mix of challenges and opportunities for investors. While the surge in new apartment completions and softening rent growth may present headwinds, the changing rent vs. buy dynamics and the rise of hybrid work could create new pockets of demand.
To navigate this volatile market, multifamily investors must stay nimble, carefully evaluate potential deals, and be prepared to weather the ups and downs. By staying informed, adapting their strategies, and focusing on the long-term fundamentals, they can position themselves for success in the ever-evolving multifamily landscape.
FAQs
What are the key trends shaping the 2024 multifamily market?
The key trends include:
- A surge in new apartment completions, with 2024 expected to see the most new supply in decades.
- Low single-digit rent growth as demand remains on the soft side.
- The changing rent vs. buy math leading to more long-term renters.
- The rise of hybrid work cementing the demand for flexible living spaces.
How can multifamily investors navigate the ups and downs of the 2024 market?
To navigate the rollercoaster, multifamily investors should:
- Carefully evaluate potential deals with strict criteria, stress-testing assumptions.
- Be patient and wait for the best deals to hit the market, focusing on growing their investor base.
- Stay fastened for the entirety of the ride, embracing the ups and downs and trusting the process.
How will the changing rent vs. buy math impact the multifamily market in 2024?
The changing rent vs. buy math, driven by factors like rising interest rates and persistent affordability challenges, will lead to more long-term renters in 2024. As homeownership becomes increasingly out of reach for many families, renting will be seen as the more practical housing option. This shift will create a larger pool of potential renters, potentially offsetting some of the softening demand caused by the surge in new apartment completions.