Following one of the largest inventory expansions in multifamily history, the broader U.S. multifamily housing market is entering a transformative period, as the latest Census Bureau data reveals a noticeable contraction in construction starts and permitting activity. The seasonally adjusted annual rate (SAAR) of multifamily starts in March dropped by 21% compared to February, falling to 290,000 units, a significant 44% lower than the same month a year ago. Additionally, permitting levels fell 22% year-over-year, totaling 433,000 units.
| March 2024 | Permits | Annual Change | Starts | Annual Change |
|---|---|---|---|---|
| Multifamily | 433,000 | -22.1% | 290,000 | -43.7% |
In the first quarter of 2024, the U.S. multifamily market added 152,000 new construction units, one of the highest quarterly figures over the past three years. However, based on current project timelines, this may be the year’s peak, with fourth-quarter completions expected to shrink to 106,000 units, the lowest in two years.
The recent rise in interest rates has directly affected multifamily construction, leading to a forecasted slowdown in 2024 and beyond. Yearly unit deliveries for 2024 are expected to total 500,000 units, a 15% decrease from 2023’s 40-year peak of 585,000 units. This slowdown in supply may offer relief for overbuilt Sun Belt markets grappling with declining occupancy rates and stunted rent growth.
Several markets that have experienced significant development activity over the last few years are anticipated to see a sizable decline in delivered units this year. Houston is projected to see a 34% decrease in delivered units in 2024, to 16,200 units from 24,500 in 2023. Atlanta is expected to witness a 21% decline in new units in 2024, offering the market a chance to stabilize its occupancy rate by the year’s second half and enable operators to increase rents again by the fourth quarter.
Other markets expected to see a significant reduction in delivered units include Minneapolis/St. Paul (-32%), Columbus, OH (-33%), and St. Louis, MO (-58%). On the other hand, markets like San Jose, CA, Louisville, KY, and San Antonio, TX are expected to see an influx of units in 2024 compared to 2023.
Markets recently characterized by overbuilding will have an opportunity to balance supply and demand, while Midwest and Northeast markets may continue their upward trajectory due to their steadier development history.
As interest rates and broader economic factors reshape development priorities, the future success of multifamily projects will hinge on strategic planning and data-driven decisions. Investors and developers should remain nimble and adaptable, carefully monitoring market dynamics while crafting localized strategies to capitalize on changing supply trends. In a shifting landscape, those who navigate effectively will position themselves to thrive in the multifamily housing market’s next chapter.
| Geography | 2023 Delivered Units | 2024 Delivered Units (Estimated) | % Decrease in Delivered Units (2024-2023) |
|---|---|---|---|
| United States | 585,316 | 499,821 | -15% |
| Saint Louis - MO (USA) | 3,930 | 1,656 | -58% |
| Portland - OR (USA) | 7,336 | 4,564 | -38% |
| Los Angeles - CA (USA) | 11,145 | 7,010 | -37% |
| Houston - TX (USA) | 24,439 | 16,193 | -34% |
| Boston - MA (USA) | 8,315 | 5,539 | -33% |
| Columbus - OH (USA) | 8,614 | 5,779 | -33% |
| Minneapolis - MN (USA) | 12,056 | 8,199 | -32% |
| Chicago - IL (USA) | 10,651 | 7,967 | -25% |
| Detroit - MI (USA) | 3,480 | 2,619 | -25% |
| San Diego - CA (USA) | 3,933 | 2,998 | -24% |
| Las Vegas - NV (USA) | 6,282 | 4,828 | -23% |
| Cleveland - OH (USA) | 2,434 | 1,885 | -23% |
| Salt Lake City - UT (USA) | 5,230 | 4,076 | -22% |
| Atlanta - GA (USA) | 22,071 | 17,437 | -21% |
| Philadelphia - PA (USA) | 12,899 | 10,342 | -20% |
