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Multifamily Demand Boosted by Single-Family Affordability Gap
Although a recent swell in effective rents—which grew slightly faster in the first quarter than annual price increase for single-family homes — is narrowing the gap between mortgage and rent payments, that gap remains wide, says Marcus & Millichap. Coupled with higher mortgage rates and a supply-demand imbalance, the gap is reinforcing demand for multifamily.
In that sector, rents advanced 16.8% year-over-year in Q1, compared to 15.4% for single-family home prices. Sun Belt markets are reporting the steepest rent increase relative to home price growth, says Marcus & Millichap.
Meanwhile, though, the Federal Reserve’s announcement of an increase to the benchmark rate accelerated growth in the 30-year mortgage rate, which breached 4% for the first time since 2019. Yet Marcus & Millichap also sees the potential for relief from home price increases in recent permitting activity: Single-family permits in February rose 5.2% Y-O-Y, while project starts advanced 13.7%.
- ◦Economy
