Walker Webcast: Madera Residential’s Jay Parsons on Multifamily’s Long-Term Sales and Rent Outlook 

“It’s tough to have more buyers than sellers,” Madera Residential’s Jay Parsons told Walker & Dunlop CEO Willy Walker in summing up why the multifamily sales market has seen fewer transactions this year than expected. Speaking on this week’s Walker Webcast, Parsons noted that the market hasn’t seen the level of distressed sales that was anticipated, which has put downward pressure on cap rates. 

Principal and head of investment strategy at Madera, Parsons added that sooner or later the volume will pick up. “There’s so much appetite for housing, both multifamily and SFR/ BTR,” he said. “I think we’re seeing more buyers. We’ve seen some international players say ‘we’re going to accept a pretty weak year one in the pro forma because we believe in the mid- and long-term story for multifamily.’ ” 

Moreover, Parsons said, value-add buyers have been largely absent from the market thus far in 2024. That has led to a dearth of deals in the Class C space—which have to come to market eventually. “I think that’ll be a big story next year as well,” he said. 

Parsons served as chief economist for RealPage before coming aboard at Madera Residential. On Wednesday’s webcast, Walker asked Parsons to discuss how the “heads on beds” strategy of tenant retention that he espoused in 2023 has played out. “I was very bullish on demand going into this year, the front-door demand, and that’s proved to be true,” said Parsons. “The back-door story has been a really interesting surprise.”  

Consider that with the post-pandemic construction boom, “we have a 50-year high in apartment supply,” Parsons said. “You have more options than ever. And yet retention rates keep going up. People are staying put.” 

What’s behind the retention success when a newer property may have opened across the street? “Candidly, I think some renters are not choosing the smartest financial decision,” said Parsons. “They’re choosing the easiest decision. And the friction of moving is outweighing what’s really a relatively small financial benefit of moving in terms of a lower rent.  

“Now, those who are moving, at times they’re getting a similar rate and a newer, better, higher amenitized property for a pretty good rent,” he continued. “So we’re seeing that demand moving up. But you’re still preserving a pretty good portion of your renter base as well.” 

Notwithstanding the proliferation of new product, “we’re going to have a second-best year for absorption other than 2021 going back three-plus decades,” Parsons said. “It’s a remarkable story that speaks to the resiliency of this sector.” 

The wide-ranging discussion also focused on development costs, the prospect of cutting the GSEs loose from conservatorship in the second Trump administration, the acquisition markets that represent the greatest long-term potential—and affordability. “There’s obviously a shortage of affordable housing,” said Parsons. “But affordability is a bifurcated issue. And what we’re seeing in the investment grade, institutional grade rental housing market is that affordability is becoming more of a tailwind than a headwind. And in the markets without supply, we’re still seeing rent growth. So that tells you it’s about supply, not about affordability.” 

On-demand replays of the Nov. 20 Walker Webcast are available through the Walker Webcast channels on YouTube, Spotify and Apple. Subscribe to get invites, replays and articles for new Walker Webcast episodes every week.