The booming apartment supply has been making a dent in rent growth this year, and Yardi Matrix expects that to continue longer than originally expected. It raised its supply forecast for 2023 and 2024 in a report this week.
The Q3 2023 supply forecast update has increased forecast completions by 6.9% for 2023 and 6.5% for 2024.
It also increased forecast completions for 2025 by 3.1% to 424,899 units.
“Construction starts have remained robust to start 2023, and these units will most likely complete in 2025,” according to the report.
Yardi Matrix said the multifamily new construction activity has been relatively unaffected by the Federal Reserve’s rate hiking cycle.
“The near-term forecast was increased as the under-construction pipeline continues to expand, and 2023 construction starts to date have not exhibited any material signs of a slowdown,” according to the report.
Currently, Yardi Matrix is tracking 688,420 under-construction units that are not in lease-up. This represents a 36.9% year-over-year increase and a 96.7% increase over pre-pandemic levels despite tightening financial conditions.
Should things deteriorate more than it is thought to this point, Yardi Matrix’s models a sharper and deeper recession translating to near-term completions going unchanged.
“However, new construction activity is more sharply reduced over a longer time horizon,” it said. In this scenario, new supply bottoms in 2026 at 355,000 units