Analyzing the Impact of Rent Growth on Multifamily Valuations

Exploring the role of rent growth and vacancies in the multifamily real estate market, discussing their impact on cash flow, property operations, and property value evaluation using cap rate. Insights on the current multifamily market state predict a potential slowdown in NOI growth but indicate a positive outlook for future growth.

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On a national level, Fannie Mae is predicting the multifamily market to remain subdued in 2024. Ever since interest rates began to rise, multifamily transactions have slowed considerably. Higher rates made profits fall, and as a result, buying and improving multifamily properties halted. And, with a massive lag in multifamily construction, new units were popping up left and right in already saturated markets, creating a race to the bottom for rent prices as multifamily operators struggled to keep their units occupied. But, the multifamily woes may be close to over.

Kim Betancourt, Vice President of Multifamily Economics and Strategic Research at Fannie Mae, joins us to share the findings of a recent multifamily report. Kim knows that there are oversupplied multifamily markets across the country. Cities like Austin have become the poster child for what oversupply can do to home and rent prices. However, Kim argues that this is only a fraction of the overall housing market, and many markets are in need of more multifamily housing.

So, if much of America is still struggling with having enough housing supply, shouldn’t rents be on an upward trend? Kim shares her team's findings and rent forecasts, explaining when rents could begin to climb, which multifamily properties will experience the most demand, and why we need MORE multifamily housing, not less.

In This Episode We Cover:

Fannie Mae’s 2024, 2025, and 2026 rent growth forecast for multifamily

A “tale of two markets” and why the “oversupply” narrative isn’t the whole story

Property classes and why B/C-class properties are seeing such strong demand

The one metric that points to a growing or shrinking multifamily real estate market

Why so many millennials are “stuck” as renters and can’t become homeowners

How rising rents could affect multifamily prices and boost valuations across the country

And So Much More!

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