- Multifamily sales hit their second-highest quarterly level in four years in Q3, per preliminary data cited by Marcus & Millichap, but higher rates may force sellers to lower prices.
- About 550,000 units are under construction, the fewest in more than a decade, and renters absorbed over 56,000 units in Q3 even as job growth slowed to 152,000.
- Concessions fell to 14.5% of apartments from a 17% peak, so tighter supply may help owners absorb higher financing costs over time.
Apartment sellers may soon have to choose between lower prices and fewer deals, according to GlobeSt’s report on Marcus & Millichap research.
Preliminary data shows multifamily sales had their second-best quarter in four years in Q3.
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The Rate Squeeze
In its November Housing Research Brief, Marcus & Millichap said higher borrowing costs could cap how much debt buyers can use. That widens the gap between what buyers can pay and what sellers want.
Closing it could mean lower valuations and slower volume while pricing adjusts. The firm says improving cash flows should offset some financing pressure over time.
Supply Hits a Low
About 550,000 multifamily units were under construction in Q3, the lowest in more than a decade. Renters still absorbed over 56,000 units even though U.S. job growth slowed to 152,000 from 242,000 in Q2.
Fewer new units gives owners more room to lift occupancy and pull back on incentives. Our brief on shrinking construction pipelines made the same point, citing Marcus & Millichap’s October outlook that apartment and industrial pipelines are down by half or more from their peaks.
Sun Belt and Concessions
Sun Belt markets kept posting strong absorption relative to inventory. Marcus & Millichap singled out Austin, Jacksonville and Tampa, where vacancy could edge lower.
Nationally, the share of apartments offering concessions fell to 14.5% in September from a post-pandemic peak of 17% in May. Class C still had the highest share at 18.1%.
Builders Under Pressure
Single-family starts hit a one-year low in September, and combined single-family and multifamily permits fell 3.2% from a year earlier. In October, 43% of homebuilders reported price cuts, up from 38% in September.
The construction cost index has risen 10 straight months through September, and competition for workers from data center projects is adding labor pressure.
Why It Matters
Buyers underwriting on thinner leverage will push on price, while sellers hold out for supply-driven rent growth. How that tension resolves depends on rates, and PIMCO’s chief investment officer has said the 10-year Treasury yield could climb to 6%.
What’s Next
Expect concessions to fade further in coming quarters, per Marcus & Millichap. Watch whether Q4 volume slows as pricing adjusts.
