Forecasting the Future: Multifamily Vacancy Rates Set to Surge Amidst Impending Recession

Poised on the brink of a moderate recession predicted to unfold later this year, multifamily vacancy rates, currently at pre-COVID levels, are set to experience an upward trend. This forthcoming economic downturn is likely to slow down household formation, leading to a surge in vacancy rates across all the primary markets. As illustrated in Figure 1, every arrow indicates an upward trajectory.

San Francisco, already grappling with job losses in the tech sector and population decline, is expected to witness an even greater divergence from historical vacancy norms.

Despite an impending increase in vacancy rates, cities like New York, Los Angeles, and Orange County are likely to stick close to their historical trends, largely owing to their supply-constrained markets.

On the other hand, the Sun Belt will continue to showcase strong household formation, although it might not suffice to counterbalance the significant supply growth in markets such as Austin (rising by 16%) and Dallas (increasing by 8%). As a result, these markets may face unsatisfactory occupancy and rental growth in the upcoming year.