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Yardi Matrix vice president Jeff Adler again delivered a master class on the current state of the multifamily sector during an Oct. 23 webinar. The recording and presentation slides are available to view online.
Multifamily is experiencing robust performance despite a significant influx of new supply, particularly in the Sun Belt and Mountain West regions. Although advertised asking rent growth for new leases has softened—often turning negative—units are still being absorbed. Overall, most markets are experiencing a healthy three to five percent growth in both occupancy and renewals.
“The multifamily industry has really performed quite well given the unbelievable amount of new supply that’s been coming in,” Adler said. In the top 20 markets tracked by Matrix analysts, the multifamily sector is grappling with substantial new supply, with approximately half a million units set to be delivered this year.
Renter-by-necessity units (Class B to C assets) are now outperforming lifestyle units (Class B+ to A assets). This is largely due to the nature of new construction, which tends to cater to the higher end of the market. This has led to some challenges for owners of lifestyle properties, as the influx of new supply dampens their performance.
Retention rates are returning to pre-pandemic levels, largely driven by affordability issues in the single-family home marketplace. This trend suggests that many renters are opting to stay put, contributing to a higher number of positive renewal lease trade-outs, even in markets experiencing rent declines.
This trend highlights the critical role housing affordability plays in the current market landscape. Adler discussed some of the specific challenges for affordable housing supply in great detail – tune in to the recording for more insights. The bottom line is that more housing will need to be constructed to resolve the nation’s affordable housing problem.
Fewer new stock deliveries are expected in 2026 and 2027, which means the stage may be set for a potential spike in multifamily rent growth, Adler forecast.
An overarching shortage of U.S. housing is unlikely to improve in the next five to ten years, suggesting a strong investment thesis for multifamily housing. As capital costs normalize, transaction activity is expected to increase. While some distress may appear in specific areas, the multifamily sector remains resilient and poised for continued long-term growth.
In a new format for Matrix, the webinar also included identification of potential investment opportunities and a comprehensive look at the state of the economy. Listen to learn more.
“The economy is pretty healthy at a macro level. But there are cracks in the economy emerging, and at some point, those cracks have to come to fruition and be resolved,” Adler noted.
