As homes become even more unaffordable with rising mortgage rates and resulting crushed application volumes, you might think that demand for apartments would be screamingly hot. And it is—or was until the third quarter. The story coming out a Newmark report is surprising, because it suggests a possible sea change in how multifamily has been performing.

"Following extraordinary property level fundamentals in 2021, quarterly absorption posted net negative demand of 82,035 units nationally in the third quarter of 2022, during the historically active leasing months of July, August and September, where absorption was negative," the report states. From huge demand to negative absorption at a time that is usually the opposite.

There was a 400,000-unit housing shortfall last year—unclear whether Newmark is combining homes and apartment units there—and that gap "has resulted in an annual average effective rent growth of 13.5% as of the third quarter of 2022, 1,070 basis points above the long-term average."