2024’s Halfway Point: How Multifamily Real Estate is Faring

By Troy Marek

The multifamily real estate market remains fundamentally sound. While certain dynamics are adding some stress to the sector, it is still healthy overall. An influx in new market-rate rental unit supply in certain markets has negatively impacted occupancy and rent growth figures. Deliveries of these new units are expected to spike this year and continue to slow sector growth and absorption for a period of time. However, the overall effect is simply a temporarily softened market. Notably, 2025 and 2026 are not anticipated to bring the same spike in new unit deliveries, and occupancy and rents should start to improve again fairly soon.

Of course, heightened interest rates continue to play a major role in the state of the multifamily real estate market, impacting market rate, workforce and affordable apartment owners alike. In June 2024, the Federal Reserve announced its decision to maintain interest rates at their current level, deeming any cuts to the rate inappropriate until there was greater confidence in inflation moving toward the stated 2% goal. ?

Many are hoping that the Federal Reserve’s interest rate strategy helps it achieve a soft landing for the U.S. economy, one that avoids recessionary conditions. Providing the Federal Reserve succeeds, it is expected that the multifamily sector will continue to grow, albeit at a slower pace than it has in recent years.

Beyond interest rates, there are additional headwinds impacting multifamily real estate today. Specifically, these include higher maintenance and upkeep costs, as well as higher insurance rates – all of which prove challenging for owners whose excess cash flow has been impacted by the slowdown in rent growth. Additionally, insurance is becoming harder to secure in general. For example, in coastal regions and other areas where natural disasters have occurred, owners are harder pressed to find providers willing to work with them. ?Some providers are leaving certain regions altogether.

Finally, a disconnect remains between buyers and sellers surrounding property valuations. Property sales are still historically down due to both interest rates and cap rates and there is a continued need for recalibration surrounding both.

For some time, new loan transactions in the sector have skewed more asset management in focus, rather than new construction in nature (note this is also an indicator of new rental unit supply slowing after this year’s spike). Of course, Freddie Mac and Fannie Mae remain committed to providing liquidity in the sector, signaling their ongoing mission focus on ensuring that Americans have access to quality rental housing, whether that be market rate units or apartments designed for those with lower incomes. Both agencies provide acquisition and refinance loan solutions and are active today, even as heightened interest rates have deterred other lenders from activity.

Apartment owners in the market today and in need of financing solutions are able to access Freddie Mac and Fannie Mae multifamily loan solutions through approved agency lenders. Regions Real Estate Capital Markets is one such lender and our team assists apartment owners daily with customized counsel and solutions to meet their varied needs.

Looking to finance your asset?

If you are a multifamily or senior housing owner/operator looking to finance, or refinance, properties, the Regions Real Estate Capital Markets Team (a Freddie Mac, Fannie Mae and HUD approved lender) is ready to assist you. To explore financing options and contact our team for details, visit: https://www.regions.com/commercial-banking/real-estate-banking/real-estate-capital-markets .

About the Author

Troy Marek is head of Real Estate Capital Markets for Regions Bank, a multifamily and senior housing real estate lender. Visit Regions Real Estate Capital Markets online at https://www.regions.com/commercial-banking/real-estate-banking/real-estate-capital-markets .

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