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Special Report

Multifamily National Report

2Q 2023

Obstructed Transition to Homeownership Underpins Luxury
Tier Rental Demand and Overshadows Current Challenges

Softer economy remains a weight on performance. Apartment vacancy has now risen in four straight quarters, after hitting an all-time low of just 2.5 percent in early 2022. Class A availability increased by the smallest margin among property tiers during that span, despite competing with record amounts of new supply. Residents are choosing and staying longer at luxury units, as the difference between an average Class A rent in the U.S. and the typical monthly mortgage payment on a median priced home roughly tripled over the past year. While higher vacancy has flattened rent growth, the luxury segment has been less impeded. As of the first quarter of 2023, the overall average effective apartment rent nationally was down about 0.6 percent from 2022’s peak, but Class A achieved a new record-high in March. The large construction pipeline likely keeps vacancy on an upward path near-term, while also reinforcing luxury tier rents. The potential for supply overhangs in select markets is likely, yet population and housing dynamics imply that these new units are needed longer-term.

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