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5 Multifamily Markets Facing Highest Levels of Excess Supply

Multifamily markets in Raleigh-Durham, Austin, and other metros are grappling with high excess supply, impacting rent levels and growth.
5 Multifamily Markets Facing Highest Levels of Excess Supply
  • The multifamily sector has been enjoying explosive growth, with a record 656K units completed in June, driving excess supply into key metros.
  • The five metros with the highest excess supply as a percentage of inventory are Raleigh-Durham, NC; Austin, TX; Jacksonville, NC; Minneapolis, MN; and Knoxville, TN.
  • Areas with the most excess supply are also seeing the largest declines in effective rent revenue, creating challenges for multifamily owners and developers.
Key Takeaways

The U.S. multifamily housing market has seen a significant surge in new units, as reported in Globest. But growth hasn’t been uniform, and some metros are facing excess supply that’s impacting rent levels and growth.

According to a new analysis by Moody’s, five key markets are facing the most excess supply in 2024, reshaping the outlook for investment and development in these areas.

Impact of Excess Supply

In June, the U.S. saw a surge in housing completions, particularly in multifamily units, with a seasonally adjusted annual rate of 656K units—marking a 40.2% YoY increase. 

However, this growth has not been evenly distributed across the country, leading to significant excess supply in specific markets. 

Moody’s analysis of 82 multifamily markets reveals that Raleigh-Durham, Austin, Jacksonville, Minneapolis, and Knoxville are the top five metros with the highest excess supply as a percentage of their inventory.

These metros are not only dealing with an oversupply of units but also seeing substantial declines in effective rent revenue. This indicates a direct link between excess supply and financial strain for property owners.

Behind The Numbers

Moody’s analysis uses percentages instead of raw unit numbers to demonstrate the proportional impact of excess supply on different markets. 

For example, while Austin saw an excess of 7,245 units, the relative impact on a smaller market like Raleigh-Durham (2.57% excess supply) is even more significant.

In Summary

As excess supply continues to shape multifamily markets nationwide, developers and investors will need to be cautious about where they focus their efforts. Understanding the dynamics of excess supply and its impact on rent growth is crucial for navigating the challenges ahead.

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