Multifamily housing’s performance has been flagging in some markets, even as the U.S. housing shortage grinds on. Why the discrepancy?
Over the past 30 years, apartment investors have not witnessed such a wide disparity in occupancy rates between markets as they are seeing today. New construction in high-growth Sun Belt markets is the main culprit. Dallas and Atlanta saw about 50 percent more multifamily completions than usual in 2022 and 2023, outpacing leasing rates. This has pushed vacancy rates in these markets above 10 percent, compared to the typical national average of 7 percent. However, we’re seeing signs of a correction. In Austin, for example, multifamily construction starts dropped from 8,000 units per quarter in early 2022 to fewer than 1,000 units per quarter this year. Sun Belt markets should see balanced fundamentals by 2026 or 2027, with strong rent growth following shortly thereafter.
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