Prospects for U.S. National Multifamily Investments 2022

Joe Fairless

July 8, 2022

Real Estate



If you are considering purchasing multifamily property, the time may be now. As the housing and health crises continue to impact the economy, competition among investors for a piece of the action increases. In the United States, national multifamily investments rose 56 percent year-over-year to $63 billion in the first quarter of 2022. This is a 77 percent gain from 2000’s peak.

CBRE Real Estate’s most recent analysis forecasts a 7 percent growth in effective rentals through 2022. In addition, the research predicts low vacancy rates through 2022. The U.S. multifamily market will reach a record high in 2022, despite the fact that vacancy rates surged during the early stages of the pandemic. This is especially true for urban Class A properties, which were severely affected by the pandemic but are anticipated to recover once offices return. Single-family home rentals are an additional asset class to monitor. It is anticipated that millennials will start families, fueling demand for apartments and single-family rental homes.

Inflation is another factor contributing to price increases. Rising prices diminish the purchasing power of fixed interest rates, therefore investors seek value equities that outperform the price increases. In 2020 and 2021, as the Federal Reserve raises interest rates, the cost of owning multifamily homes will grow. In addition, investors should be mindful of rising ownership expenses and the resultant inflation. Investors are becoming increasingly concerned about inflation, particularly in multifamily finance.

Significantly higher than the previous year, the federal housing finance agency has set a maximum of $78 billion on multifamily purchase volumes for 2022. Although it will be challenging to pinpoint an exact date, the cap rate should remain at least 4% above the 10-Year Treasury yield through 2021. This growth rate should continue to boost the value of multifamily assets over the next years. Although the prognosis is favorable for multifamily investors, the market is not expected to be as robust as it is currently.

In 2021, the multifamily sector is anticipated to increase by an additional 20%, nearly double the $335 billion invested in multifamily assets in 2019. With more time spent at home, the average rent in the main U.S. cities is now higher than it was before the recession. In addition to rising earnings, shifting spending patterns, and the opportunity to work from home, the demand for multifamily buildings has increased in these cities. In addition to these factors, a significant number of multifamily constructions will offer increased rental rates.

As the housing crisis continues to wreak havoc on the real estate market, a number of investors have decided to investigate the multifamily sector. The multifamily industry will have moderate growth in 2022, according to CBRE’s U.S. National Multifamily Investment Outlook 2022. Despite the fact that the economy will continue to recover from the recession, the supply of multifamily housing will be limited across the board until at least 2023.

While prices for single-family homes continue to grow, occupancy rates for multifamily dwellings remain constant. Comparatively to office and select retail facilities, occupancy rates for multifamily complexes have stayed constant. Consequently, prospective investors should consider the multifamily investment perspective. This research is anticipated to be a valuable resource for real estate investment planning. Although the prospects for multifamily investment are favorable, investors need also be prepared for rising interest rates and purchase prices.

Since the outbreak of the pandemic, the underlying fundamentals of the multifamily sector have improved globally. The national multifamily investment market is anticipated to reach $213 billion in 2021, a 10 percent rise over pre-pandemic sales levels. However, the recovery will take some time to reach the most densely populated cities. In addition, the majority of large markets will continue to be undersupplied during 2022. This limited supply will permit rent hikes in 2021, albeit at a slower rate than in prior years.

Fannie Mae’s most recent economic estimate indicates that the number of jobs in the United States will increase by 2.8% in 2022, which could translate to 4.3 million new jobs. Despite robust demand, the increase in employment will result in a shortage of new multifamily units. As the economy continues to expand, there may be 600,000 new rental units. In spite of this, the market will remain undersupplied by the end of the year, and this will prevent replacement demand from overwhelming new supply.