Yardi Matrix has slightly increased its multifamily supply forecast because of a larger under-development pipeline combined with elevated completion times. However, it expects new-construction activity to decelerate, with new supply projected to bottom out in 2026.
In its second quarter update, Yardi Matrix increased its supply forecast 2.6% to 553,613 units for 2024. It also increased its 2025 and 2026 forecasts by 2.2% with 468,958 and 385,225 units coming online, respectively. Longer term, Yardi Matrix’s baseline forecasts are relatively unchanged: a modest 0.3% increase for 2027 to 396,037 units, a 1.2% increase for 2028 to 406,376 units, and a -0.1% decrease in 2029 to 426,283 units.
According to Yardi Matrix, for multifamily markets tracked on or before January 2020, 1.3 million units are under construction. This includes 536,325 units that are in lease-up and expected to come online this year. The volume is slightly below the trailing six-month average of 545,905 units and down 1.6% quarter over quarter.
The bulk of the remaining 728,357 units under construction and not in lease-up are expected to be completed in 2025. This volume represents increases of 4.3% quarter over quarter and 21.2% year over year. However, elevated construction times could extend some completions to 2026.
Construction starts began to decline in the second half of last year. In the fourth quarter, Yardi Matrix identified 107,746 units that started construction; however, because of a lag time, it expects the number to increase. The current fourth quarter totals represent a 34.8% drop compared with the fourth quarter of 2022.
“The combination of a weakening economic backdrop, persistently tight financial conditions, and record levels of new supply will materially depress new-construction activity in 2024,” noted Yardi Matrix analysts.
The number of days in construction continues to be elevated. In the first quarter, the national average for garden-style apartments was 689 days, above the trailing four-quarter average of 674 days. Mid-rise properties completed in the first quarter save an average of 784 days in construction, also above the trailing four-quarter average of 738 days. In addition, high-rise properties averaged 878 days in construction, an increase over completion times recorded in the prior two quarters; however, the average was below the levels seen in 2021 and 2022.
