The direction of inflation and interest rates will be closely watched by the multifamily industry along with other multifamily challenges in the second half of 2024, Yardi Matrix says in their summer report.
“Performance continues to benefit from the strong economy and robust demand, while facing headwinds that include a large number of deliveries in some markets and higher-for-longer interest rates,” the report says.
Yardi Matrix’s mid-year 2024 outlook looks at how these issues will affect the market.
Some highlights:
- Multifamily performance continues to be strong, but it is not without challenges. Demand remains steady from consistent job growth and immigration, but some fundamental metrics including rent growth and occupancy have deteriorated since the market peak in 2022.
- Plus, the capital markets will remain a headwind until rates recede.
- “We expect growth to slow in the second half of the year. Employment and consumer activity are positive, but there are some worrying signs and there is stress on lower income households.”
- Inflation is likely to decelerate, but not fast enough to entice the Federal Reserve to cut interest rates meaningfully.
- Higher-for-longer rates are a mixed blessing. Demand is boosted by weaker home sales, as would-be homebuyers can’t afford to buy and homeowners with low mortgage rates stay in place. But high mortgage rates put stress on sales and refinancings.
- Rent growth is weak, and likely will remain so. Absorption so far this year continues to be healthy, at a pace of nearly 300,000 units nationally, but supply growth is putting pressure on rents in the Sun Belt.
- Supply growth will be high in 2024 and 2025, but will wane after that.
- Transaction activity remains weak, as rates are still high.
- Debt continues to be a sticking point.
“We expect inflation to recede in the second half, in large part due to decelerating rents. Housing is a big contributor to the inflation numbers, and the methodology used to calculate the CPI means it lags rental-market changes,” the report says.
“Our expectation is that economic growth will slow but remain positive in the second half of the year, while there is a deceleration in some of the factors such as job and income growth that created robust demand for multifamily,” the report says.
Read the full Yardi-Matrix Mid-Year report here.
About Yardi Matrix
Yardi Matrix researches and reports on multifamily, office and self-storage properties across the United States, serving the needs of a variety of industry professionals. Yardi Matrix Multifamily provides accurate data on 18+ million units, covering more than 90 percent of the U.S. population. Contact the company at (480) 663-1149.
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