2024 Outlook: Cooling Trends in the U.S. Multifamily Market

As we enter January 2024, the Apartment List National Rent Report highlights a notable downtrend in the U.S. multifamily market.

2024 Outlook: Cooling Trends in the U.S. Multifamily Market

As we enter January 2024, the Apartment List National Rent Report highlights a notable downtrend in the U.S. multifamily market.

Good morning. U.S. Treasury yields continued to rise this week as investors await nonfarm payrolls and assess the latest employment numbers for indications of strength in the labor market. In today’s issue, we cover the latest Apartment List National Rent Report figures.

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Market Snapshot

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*Data as of 1/4/2024 market close.


As Supply Swells, Apartment Rents Dip And Investors Pull Back

As we enter January 2024, the Apartment List National Rent Report highlights a notable downtrend in the U.S. multifamily market.

National rent trends: The report highlights a 0.8% drop in median rent, now at $1,379, continuing a five-month streak of negative growth. Interestingly, this decline surpasses typical seasonal patterns. Year-over-year growth stands at -1%, indicating that, on average, rents across the U.S. are marginally lower than last year. Remember when rent growth hit a whopping 18%? Those days are gone, but rents are still $250 higher per month compared to three years ago.

Regional variations: The report sheds light on regional disparities, with December rents down month-over-month in 83 of the 100 largest cities and down year-over-year in 60 of these cities. Oakland, CA, leads the decline with a 9.3% year-over-year drop. The seasonal trend is evident, with rents generally rising in spring and summer, then dipping in fall and winter. December's decline, while modest, is the second steepest since 2017.

It’s all about supply: On the supply side, the national vacancy index is at 6.5%, surpassing pre-pandemic levels. This increase is due to the steady release of new apartment constructions, particularly in Sun Belt markets. Estimates for new apartment deliveries in 2024 vary, with CoStar projecting around 433,000 units and RealPage predicting 670,000 new multifamily homes. Notably, nearly 1 million new units were under construction as of November, marking the highest level in over five decades, as reported by the Census Bureau.


Big picture: The U.S. rental market is cooling, but not uniformly across the US: the Sun Belt is adjusting to excess supply, while the Midwest and Northeast see rising demand. Investor caution is evident, with a 68% drop in multifamily sales YoY to $5.1B and a 12.1% decrease in property prices. 2024 forecasts suggest modest rent hikes of 1.2-1.5%, below inflation. Despite this, many renters continue to feel financial strain from previous rent hikes, particularly those who rent out of necessity, allocating over 31% of their income to housing costs.

Editor’s Picks

  • Ownership shift: Witkoff has acquired the Banyan Cay Resort & Golf Club in West Palm Beach, securing a $75 million loan from the previous owner, with co-CEOs Steve and Alex Witkoff now overseeing the 200-acre mixed-use development.

  • Moving to Texas: For the third year in a row, Texas leads the U-Haul Growth Index, attracting the highest number of one-way U-Haul movers in 2023.

  • New venture: Pennington Partners & Co., known for assisting entrepreneurs and their families, is expanding into the commercial real estate market with a fresh initiative.

  • Uncertain valuations: The FDIC's sale of equity stakes in Signature Bank's loan portfolios leaves NYC market valuations unclear post-pandemic, causing ongoing challenges for owners and lenders in determining real property values.

  • Leadership transition: The commercial real estate sector is facing a major generational shift in leadership, encompassing large brokerages to family firms, posing substantial risks to performance and valuations.

  • Distressed watch: Investors and industry observers are keenly anticipating when the market will see a surge in distressed properties, but some experts say it may never come.


  • Cheers to change: Urban Residential Properties and The Manhattan Building Company kick off the new year with a $63 million loan to transform Allentown's historic Neuweiler Brewery into a Class A multifamily property.

  • Renter preference: A Knightvest survey reveals 59% of multifamily tenants rent by choice, not necessity, indicating a significant shift in housing preferences among a large segment of the U.S. population.

  • Tax exemption turmoil: Bronx landlords Finkelstein Timberger East Real Estate and the Morgan Group are suing New York City, claiming delays in approving J-51 tax exemptions led to significant financial losses in sales and financing.

  • Maine's appeal: A new PlacerAI report highlights Maine as a popular migration destination on the East Coast, credited to its low crime rate and promising job market among other factors.

  • Housing affordability: Redfin's analysis reveals a stark decline in home affordability across major U.S. metros, with only 16% of homes in 2023 priced within reach of median household incomes.


  • Industrial shift: While South Florida's industrial sector cools from its pandemic peak, a surge in year-end deals indicates ongoing investor interest in the region.

  • Property sale: Terreno Realty Corporation, specializing in coastal industrial real estate, sold a Compton-based property for about $15.9 million, though the buyer remains undisclosed.

  • Acquisition: Rexford Industrial Realty has purchased two industrial sites in South El Monte and Anaheim for a total of $69.5 million and is planning to redevelop both properties.

  • New HQ: DSV Air and Sea invests $46 million in 87 acres of land in Mesa, Arizona, for a new regional headquarters and a 1.73 million-square-foot warehouse.

  • Construction decline: Savills reports a significant 72% drop in industrial construction starts in Q3 2023 compared to the peak in Q2 2022, suggesting the current tenant-favorable market conditions might be short-lived.


  • Foreclosure auction: The Williamsburgh Savings Bank Tower's retail space, famously noted for its dome, is set for a foreclosure auction in 90 days following a legal action by lender Amherst Capital against its current owners.

  • Culinary expansion: Guatemalan fast-food chain Pollo Campero is set to open a new outlet at Vornado Realty Trust's Penn 1 tower, leasing 3,521 square feet on the ground floor for ten years.

  • Economic trends: Amid economic uncertainties and high prices, the economy displayed strong growth in 2023, setting the stage for five key trends to impact retail sales and consumers in 2024.


  • Fed's caution: As the new year begins, the Federal Reserve maintains its concern about the office sector's persistent weakness and the potential surge in loan delinquencies, as revealed in their recent meeting.

  • High-stakes purchase: FanDuel acquires a new Beverly Hills office development for $71 million from Skanska USA, paying over $1,410 per square foot, significantly above Southern California's average office sale price.

  • Delinquency rate dip: Trepp reports a slight decrease in the CMBS delinquency rate to 4.51% in December 2023, with a notable 26 basis point drop in office property delinquencies, hinting at a resilient market.


An Uptick in Manhattan Home Prices Signal Signs of a Market Rebound

For the first time in over a year, Manhattan's real estate market has seen an increase in home prices, with the median price reaching $1.16 million in the fourth quarter, a 5.1% jump from the previous year.

Luxury sales surge: Despite a decline in overall transaction numbers, there was a remarkable surge in sales above $5 million. During this phase of rising mortgage rates, a record number of buyers, over two-thirds, opted for cash transactions. However, the market is now showing signs of tilting back towards mortgage borrowers as financing costs have decreased significantly in recent months.

Growing demand: There's also an uptick in contracts to buy homes in Manhattan, indicating rising demand. This increase, coupled with falling mortgage rates, is expected to attract more buyers and sellers, potentially leading to further price rises. Jonathan Miller, president of Miller Samuel, observes that while a complete market reversal isn't imminent, there's a clear trend towards stronger market performance in terms of transactions, inventory, and, potentially, prices.


Looking ahead: Manhattan's real estate market is exhibiting early signs of recovery, driven by rising prices, a surge in luxury sales, and changing mortgage rates. This trend is set to foster a more robust market, marked by increased transactions and growing buyer and seller interest.


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