Decline of Cap Rates Signal Possible Multifamily Market Turnaround
The multifamily sector is experiencing stress due to oversupply in Sun Belt cities, leading to higher vacancies, lower rents, and reduced net operating income. CBRE’s recent survey shows that most expect cap rates to stabilize or decline slightly, signaling a possible market turnaround. Optimism varies by region: about 80% of respondents in gateway markets expect cap rates to fall, while only 9% in high-growth Sun Belt areas share this view. The Sun Belt’s rapid development has led to record construction levels, with June 2024 seeing a 10.4% increase in private housing completions. Despite current challenges, Freddie Mac’s Sara Hoffmann notes that the market remains “slow but steady,” with excess inventory expected to take time to resolve.
