Multifamily Housing Trends

Have you noticed that nearly every multifamily buyer today is targeting the same thing? Newer vintage, well located, Class A/B+, ideally with some financial distress compelling an exit ... but not physical distress. Why? -- Limited appetite for deferred maintenance and other capex requirements associated with older properties. Newer properties in good physical condition allow buyers to focus on operational improvements. -- Concern about renters' potential "flight to quality" up market (i.e. "filtering") as a side effect of the 50-year high in new apartment supply luring mid- and upper-income renters into newer units via generous concessions and rent cuts. -- Concern about renter affordability challenges that are increasingly concentrated at the lower end of the market (a phenomenon largely missed by today's headlines), where delinquency rates tend to be higher. Few buyers today want to take over assets that may eventually require choosing between a significant number of eviction filings or a significant number of non-paying renters. Those challenges just aren't as present in newer/pricier properties, where rent-to-income ratios tend to be lower despite higher rents. If this pattern holds, what are the implications? A few possibilities: (Disclaimer-- as always, this is not investment advice) -- Firming investor confidence that Class A/B values have bottomed. By all accounts, there are still a lot of wanna-be buyers out there and many are playing in the same buy box. So those A/B values may even start moving back up again. And this view is now supported by recent reports on apartment values from Green Street, CBRE and MSCI. -- Re-widening spreads between Class A and Class C. Spreads compressed during the last few years -- even prior to COVID, though the trend certainly accelerated in 2021-22 given the flood of value-add buyers with short-term holds. Now a lot of them may still be holding longer than planned (and perhaps barely holding on as they work with their lenders) given reduced values, inability to raise rents to pro forma, plus limited buyer pool -- especially if the owner did not complete the renovation. -- More mixed signals on multifamily. I think we'll see mix of Class A/B sales at market-improving prices at the same time we see more value-add / older-vintage distress making headlines. Those paying close attention should be able to see the trends through the noise. -- Eventually, some buyers are going to do very well gobbling up older-vintage apartments at discounted prices. But while it appears the market has found its clearing price for A/B, I'm not sure we're there yet for Class C. So how long does that take? And what is the buyer profile -- especially now that so many groups that targeted such assets in 2021-22 are now sidelines? We'll see. There's still ample renter demand for Class C, so there's still opportunity for good operators entering on a good basis. What'd I miss? #multifamily #apartments #CRE

After weathering one of the most aggressive supply cycles in modern history, the U.S. multifamily sector is finally showing signs of stabilization (!). While near-term apartment performance has been challenged by elevated deliveries and widespread concessions, the underlying renter profile, demographic momentum, and improving absorption trends suggest that the worst of the dip may be behind us. Just like the for-sale market, the apartment landscape is highly local. Many markets, including Dallas, Austin, and Houston, are still working through a supply overhang. In contrast, parts of the Northeast continue to hold up well. The Bay Area, meanwhile, stands out, leading all markets in rent growth in the latest data, as AI-related investment supports regional demand. Our latest Zonda Apartment Outlook report just launched to clients. Subscribers can log in today to explore local differences in demand, leasing trends, operations, and the pipeline outlook. Kimberly Byrum (formerly Fiala) Julia Bunch Sean Fergus Tim Sullivan Kyle Cheslock Keith Hughes Cameron McIntosh

Here's yet another datapoint that suggests the U.S. apartment market has turned a corner. I think it's a unique way to assess underlying market fundamentals. Year-to-date (through July), there has been effectively no change in the amount of unoccupied stabilized units. Technically, it's been a .0001% increase if you're keeping score at home. This is not only a remarkable change of course from the past 12 months... it's actually a change from any of the past three years - albeit very different directional movement in those prior years. But the main takeaway for 2024 thus far is this: absorption is largely matching the pace of supply. Compare that to January 2023 through July 2023 when the nation saw an increase of about 68,000 unoccupied units. In other words, supply clearly outpacing absorption. But even that 2023 figure was a stark contrast relative to the prior two years. From January 2022 through July 2022, there was a huge increase in unoccupied units (nearly 300,000 units). In this case, a tangible demand deficit was materializing as inflation ripped through the economy and consumer confidence plummeted. This was also partially driven by some rubber banding from the 2021 figures whereby there was a 300,000 unit decrease in unoccupied units. An overlay of year-to-date rent growth for any of these periods yields a strikingly similar trajectory (read: it's always about supply and demand!), but that's another conversation for another time. Let's refocus on the 2024 trend here and what that might indicate though. Considering the striking stability of that line thus far this year, it really just shows that demand is doing a pretty good job maintaining momentum with supply. Having said all this, there's something else to consider: lease-up properties. By our definition, "stabilized units" means any market-rate property above 85% occupied. In other words, lease-ups aren't factored into the equation here. And as we've said for the past few months, there's a lot of lift still to be done for demand to fill those lease-up units. So the balance between supply and aggregate demand (i.e., stabilized units + lease-up units) still isn't quite out of the woods just yet. But when you consider that well over 95% of the nation's apartment stock would qualify as stabilized (about 2.5% is currently in lease up then a few percentage points would probably qualify as under renovation), then I think you can make the argument that the overall market is pivoting TOWARDS equilibrium and not AWAY from it a la 2022/2023.

Most multifamily operators evaluate AI by comparing vendors. They should be evaluating themselves first. We built an assessment to benchmark your firm's readiness in 15 minutes or less: When multifamily operators discuss AI, the conversation focuses on evaluating technology and picking vendors. That's the wrong starting point. Instead, ask: how ready is your organization to adopt AI? Do you have the data infrastructure, people, and processes to turn AI into results? We partnered with UDP and Insights by Blueprint to build an AI readiness assessment. It takes 15 minutes to complete and is designed for owners, managing directors, COOs, or CTOs at multifamily and SFR operators. Once we have responses, we'll share benchmarked reports showing how you stack up against peers in each category and identify high-leverage improvements for quick wins. The assessment evaluates eight areas that determine AI success: 1/ Data infrastructure and integration: Are your core systems connected? Is data centralized? Strong integration means portfolio-level visibility in minutes, not days. Weak integration means every dashboard, forecast, and AI model becomes slow to deliver. 2/ Data quality, governance, and standardization: Does "occupancy" mean the same thing across regions and funds? Inconsistent definitions kill analytics before they start. Strong governance makes scale possible. 3/ Reporting, dashboards, and self-service access: Can executives get the right metric at the right time without a data safari?Self-service shifts analytics from a ticket queue to a conversation. 4/ Analytics maturity and decisioning: Are you moving from "what happened" to "why it happened" and "what we should do next"? Mature teams operationalize insights by embedding them in workflows, not just slide decks. 5/ AI and automation: Where are you systematically identifying high-value, repetitive workflows and measuring impact? AI becomes real when it saves hours or dollars at scale. 6/ Security, privacy, and compliance: Is access least-privilege and auditable? Good security doesn't slow the business. It enables faster onboarding of tools and partners. 7/ Operating model, talent, and change management: Who owns metrics? Who runs the backlog? Technology fails without the organization to support it. 8/ Outcomes and ROI: Can you tie data and AI investments to business results? From faster closes, to fewer days vacant, and higher renewal rates: tie everything back to results. The gap between AI hype and results is organizational readiness. Knowing where you stand is a must before you start buying tools, changing processes and training teams. Otherwise, you might waste tons of time and money. Take the assessment today. Link in comments.

🏘️ Housing starts, or new home construction, fell 3.1% in October to the lowest level since July, missing expectations. Single-family starts drove the losses; multifamily posted gains. Compared to a year ago, starts are down across the board as higher interest rates and supply-side constraints on building sideline contractors. Single-family starts fell 6.9% to just under one million units. That has been the upper limit to how much builders can produce in a year, given ongoing worker shortages, tight lending conditions and high material and land costs. Mortgage rates climbed to the highest level since July in November and are not expected to fall significantly before year-end. Demand is flattened when rates rise, especially this quickly. Prospective buyers are waiting even longer to enter the housing market; the median age of the first-time buyer was 38 years old in 2024, the highest on record. Builders have played a key role in moving downscale and trying to service the pent-up demand of first-time buyers. The falls in single-family starts in the South and Northeast were the largest. The drop in the South, the biggest construction region, was exacerbated by disruptions from Hurricanes Helene and Milton. Home building and materials stores have reported a pickup in spending as repairs get underway. That suggests we will see some catch-up soon. However, we do not expect to see the same level of rebuilding we once did due to lack of insurance. Add in the breadth of devastation and many will likely relocate. Multifamily starts for five units or more jumped 9.8% in October, but from a very low base. Starts are 12.6% lower than a year ago and not expected to regain ground next year. Builders have pivoted away from multifamily construction as they complete backlogs. There were 804,000 units under construction in October, lower than the one million record hit in 2023, but still above pre-pandemic averages. Building permits, which signal future plans, slipped 0.6% on lower multifamily permit applications. Single-family permits eked out a 0.5% gain but multifamily dropped 3%. Lack of multifamily units in the pipeline suggests rents will rise again by the end of next year. Builders’ sentiment has gained ground recently but remains in pessimistic territory. According to the National Association of Home Builders, they are still concerned about sales conditions and foot traffic but are starting to feel optimistic about sales prospects in the next six months. The new optimism relies heavily on lower mortgage rate expectations. #Housing #Construction #Hurricanes #Rebuilding Read more: https://lnkd.in/gKP2VKMQ

February housing starts rose to 1.501 million, exceeding expectations of 1.385 million and reversing January’s decline. Housing starts bounced back from weather-related disruptions in January. However, permits, a key indicator of future construction, fell to 1.456 million, a slight decline but still above consensus expectations of 1.453 million. February saw a strong rebound in single-family starts, which rose 11.4% from January, though remaining 2.3% below last year’s level. Single-family permits were essentially flat on a monthly basis, but down 3.4% from a year ago. Single-family completions increased, rising 7% month over month, with the Northeast and Midwest seeing the largest monthly gains. The Northeast recorded its highest level of completions since April 2024. The Midwest also saw a rebound, but this was largely a correction from January’s steep decline, rather than a sign of ongoing momentum. Despite these improvements, builders continue to face challenges. Builder sentiment declined in March, hitting its lowest level since August. Optimism about future sales remains weak, and current sales conditions have fallen to their lowest point since December 2023. Persistent cost pressures are a key concern—material costs remain about 40% higher than pre-pandemic levels, and new tariff actions could add an estimated $9,200 per home. If these tariffs persist, builders may have no choice but to pass these costs on to buyers, further straining affordability. At the same time, builders are competing with rising existing-home inventory, particularly in key markets like Florida and Texas, which could ease some supply constraints but also shift demand away from new construction. Still, there are some potential tailwinds. Potentially less restrictive monetary policy in the second half of the year and better access to capital could be tailwinds. The price gap between new and existing homes has narrowed, making new construction more competitive. In this higher-for-longer rate environment, builders can use mortgage rate buydowns to make payments more affordable, a strategy that is likely to remain central in 2025. Additionally, there is cautious optimism around regulatory policy, with potential reforms aimed at reducing inefficient regulatory costs in the construction process. On the multifamily side, a depleted project pipeline and ongoing affordability constraints in the for-sale market could support rental demand. Given the pace of completions relative to the size of the backlog, multifamily builders now have their smallest relative backlog since the post-GFC period. Over the longer term, demographic trends remain supportive of multifamily construction, with the prime renter-age population expected to continue growing. The housing market is at an inflection point. Builders face cost pressures, competition from rising resale inventory, and policy uncertainty, but strategic incentives and potential regulatory shifts could provide some relief.

This morning’s housing starts report gives us one of the clearest signs yet that builders are regaining momentum after a cautious 2025. January’s pace of 1.49 million new housing starts marks a 7.2% increase from December and a 9.5% gain year over year. That’s a meaningful shift—especially in a market where affordability challenges and mortgage‑rate volatility have made builders understandably hesitant to break ground. What stands out most is the mix. Single‑family starts dipped slightly, but new multifamily construction surged, particularly in 5‑plus‑unit buildings. In practical terms, that means more rental supply is on the way at a moment when many households are still priced out of ownership. It’s not a complete fix for affordability, but it’s an important pressure‑relief valve. For buyers, more starts today mean better inventory options later this year, and a market where sellers will need to meet buyers more realistically. For renters, additional multifamily supply helps moderate rent growth and gives households breathing room to plan their next move. For market watchers, the key takeaway is this: we’re seeing early evidence that residential construction is turning the corner, helping the broader housing market move toward healthier balance. #Homesdotcom #HousingMarket #ResidentialEconomics #HousingData #RealEstateInsights #Affordability #HomeBuying

The Fed just made its latest move—again. But here’s what most investors still don’t get: It’s not the Fed that’s going to make or break your next multifamily deal. It’s this: the shrinking supply of value-add properties—and the growing demand chasing them. While everyone’s fixated on interest rates, here’s what the pros are watching: 🏗️ New construction has slowed dramatically 🏚️ Many older properties haven’t been upgraded in years 📉 Owners with high debt are holding on or can’t afford the rehab 📈 Meanwhile, demand for reasonably priced, livable housing is climbing That creates a massive opening for value-add investors who know how to: ✔️ Spot under-managed, under-rented assets ✔️ Improve operations, not just interiors ✔️ Create cash flow and long-term equity upside The truth is: The Fed doesn’t control your returns. Your business plan does. Stop waiting for rates to drop. Start looking for opportunities where you can force appreciation regardless of what the Fed does next. 📊 Recent data backs it up: → Rent growth in Q1 2025 was +0.8% YoY → Multifamily completions dropped 27% from late 2024 → Value-add inventory is tightening fast Source: Newmark Q1 2025 Multifamily Report, Yardi Matrix Are you letting headlines guide your strategy—or are you building wealth with facts?

Longevity real estate is coming!!! The next trillion-dollar wellness category won't be wearables, you'll live inside it. One of the biggest trends called out for 2026 is longevity/wellness real estate (I actually hate the names and don't think they do it justice). Residences, hospitality and communities with preventive medicine, diagnostics and personalised health built directly into daily living. Having spent years operating in and building physical wellness spaces and seen the impact in-person care can have, this one feels powerful. Everyone told us physical was dead..... 😅 "It's all going digital." We kept seeing the opposite: the more digital life became, the more people craved exceptional physical environments and physical experiences. Now look around...... Wellness real estate is the fastest growing wellness segment on the planet. $876B today, growing 23.6% a year since 2019, nearly double the next fastest segment, and forecast to hit $1.8 trillion by 2030!! (Global Wellness Institute) Social wellness clubs and bathhouses are raising serious rounds. BATHHOUSE just closed $35M and is tracking towards ~$120M in run rate revenue. Othership has pulled in over $20M across three rounds to expand into the US. Remedy Place raised at a $60M valuation, funded largely by its own members who see the value. Hotels, developers and operators are all racing to bolt health into the built environment. Six Senses is putting a longevity clinic inside its Amaala resort. Equinox is opening a hotel there with hyperbaric chambers and IV therapy. CLINIQUE LA PRAIRIE is bolting its Swiss longevity clinics onto One&Only Resorts. Kas Bordier is on a mission to make residences healthier. Sam Nazarian and Tony Robbins are building 15 hotels and 10 longevity centers under The Estate by 2030..... There is clearly a HUGE shift towards Longevity, but here's my warning, physical spaces are brutally hard. Margins are smaller, Operationally complex, staffing brings challenges, and they are naturally CAPEX hungry. The winners will be operators who understand both hospitality AND health outcomes. That combination is rare.