Multifamily May Be Headed for Slowdown

Some markets have become flooded with new apartments as developers respond to demand, says Ten-X’s Peter Muoio.

IRVINE, CA—What goes up must come down, even if only slightly and gradually. After a long run well ahead of its prior peak, the multifamily sector may now be headed for a slowdown, Ten-X said Tuesday. Among other factors, the online real estate marketplace cites another wave of new supply coming this year following a record number of completions in 2016.

A combined influx of 500,000-plus units between this year and last is expected to drive vacancies as high as 5.6% over the course of 2017, before climbing above 6% during a modeled cyclical downturn beginning in 2019. Already, the slight uptick in vacancies has begun to slow rent growth, with the third quarter posting the lowest quarterly increase since 2013. Ten-X Research projects rent growth will continue to grow by roughly 3% annually until 2018, before leveling off to roughly 1% annual gains during the two-year modeled downturn.