Apartment Market Sees Boom Now, But Experts Warn of Potential 2026 Downturn:

There is a great deal of hand-wringing about the huge number of multifamily deliveries taking place nationwide (575,000 delivered in 2023, with 475,000 more coming this year, and back to a more normal 350,000 in 2025, according to CoStar). The rate of growth of rents has slowed dramatically, falling in many parts of the country. This supply will remain a headwind for rent increases for the next 12 to 24 months.

But here’s the upside: fewer apartments are starting construction, which will most likely pave the way for significant rent gains and demand two years from now.

Of course (I’m not the first to say it):?housing is local. There is a different supply-demand story in Phoenix than in, say, Miami or Chicago. The epitome of this is the West Palm Beach, Florida market, in which a couple making a combined income of $100,000 now struggles to afford the median-priced home, whose listing price was $565,000 in December. Prices in this market continue to rise, and new construction homes are often priced over $1 million. The influx of ultra-high-paying jobs in the financial services sector (Goldman Sachs just set up shop in West Palm Beach) drives this price movement.

The story is similar in Miami, as all of southeast Florida is now part of what many are calling Wall Street South. Stephen Bittel, CEO of development company Terranova, put it this way in a recent phone conversation: “First, the bosses came in and bought in the $10 million range; the next wave bought in the $3 million to $5 million range, and now the workers are coming in and buying in the $400,000 to $600,000 range.” Of course, even within a market, there are huge differences from submarket to submarket. In Miami, the downtown is facing a huge pipeline relative to the demand, but Hunter Housing Economics’ market studies show that the demand is expected to be high enough to absorb the supply over the next four years in other urban Miami submarkets such as Wynwood, Edgewater, and Miami Beach.

The most startling thing one notices when looking across the country is how well the Midwest is doing right now, due to a lower supply of multifamily products than in other parts of the country. The midwestern markets are doing better than most; Chicago rents are still up 4.1% year-over-year, according to Beekin, a firm that provides a rent-optimization platform to property managers nationwide. The entire Midwest region is outperforming, covering the main KPIs of rent growth tenant retention, and occupancy rates. Cincinnati, Ohio is another of the fastest-growing markets in the nation in terms of year-over-year rent growth.

One piece of good news for developers and investors is that demand (absorption) is continuing apace, and that is keeping this supply situation from being even more painful than it already is. The economy is still steaming along, and high mortgage rates are continuing to force newly-forming households to remain renters for longer. Jay Lybic of CoStar told me that his numbers show that absorption more than doubled in the last year, from 144,000 in 2022 to 315,000 in 2023, with every indication that demand will go higher still in 2024.

One piece of good news for developers and investors is that demand (absorption) is continuing apace, and that is keeping this supply situation from being even more painful than it already is. The economy is still steaming along, and high mortgage rates are continuing to force newly-forming households to remain renters for longer. Jay Lybic of CoStar told me that his numbers show that absorption more than doubled in the last year, from 144,000 in 2022 to 315,000 in 2023, with every indication that demand will go higher still in 2024.

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