- New multifamily construction deliveries are expected to rise significantly in 2024, remain elevated in 2025 and then fall back in the following years, according to Yardi Matrix’s revised new construction forecast for the fourth quarter of 2023.
- A number of new developments have prompted Yardi to revise its completion forecasts for the coming years, raising numbers for 2024-2025 and pulling back for 2026-2028. Construction starts peaked in May, according to Yardi’s data, while the U.S. Census Bureau reported a sharp contraction in multifamily starts in August.
- Planned and prospective construction pipelines have also both plateaued. The number of planned units in the construction pipeline stood at 1.16 million in the third quarter — up 19.9% from one year earlier, but only 0.6% from the previous quarter. This is a sharp decline from the growth seen post-pandemic, and a sign that development interest is slowing, according to Yardi.
There are currently 1.2 million units in the construction pipeline in markets Yardi Matrix has tracked since January 2020. Of these, 479,364 are in lease-up, about 16% more than one year ago. These units are expected to be completed this year or in the first half of 2024.
By the end of 2023, Yardi expects that 487,512 new unit deliveries will have happened over the course of the year, up slightly from its predictions last quarter. Phoenix is expected to see the most new units in 2023 at 20,541, while Huntsville, Alabama, will have the highest share of new units as a portion of total stock at 12.75%.
Deliveries are then expected to climb to approximately 536,145 in 2024. Austin, Texas, is expected to receive the most new units in 2024 at 26,948, and Colorado Springs, Colorado’s housing stock is set to grow by 10.13%.
“We continue to expect a mild recession will start in late 2023 or early 2024,” the report reads. “The combination of a weakening economic environment, tight financing conditions and record levels of new supply coming online will materially depress new construction activity in the latter part of 2023 and all of 2024. Our baseline forecast for 2026[-2028] has therefore been reduced.”
This scenario assumes multifamily fundamentals remain strong, and anticipates a modest recovery in 2027, with a 29.6% peak decline. An alternative downside forecast calls for a deeper, longer recession with weaker fundamentals. In this model, construction starts begin to fall in the second half of 2023 and continue to fall through 2024, creating a sharp decline in deliveries in later years, peaking at 37.5%.