There's No Reason to Panic About Multifamily

NEW YORK CITY–The keynote speaker at GlobeSt.com’s Spring Multifamily conference, held this week at the Lighthouse on Pier 61 in Manhattan, delivered a pep talk to an audience that really needed one.

The weather was too chilly to go outside and enjoy a spectacular view of the Hudson River, but Kim Betancourt, Fannie Mae’s vice president of economics and multifamily research, did her best to lift the gloomy mood of her audience.

In no uncertain terms, Betancourt told everybody to snap out of it:

“Everybody, please stop panicking,” she declared. “We’re seeing some rise in vacancy, and we’re seeing some decline in pricing, but not a significant amount.”

Standing before a slide showing the four phases of an economic cycle (recovery, expansion, oversupply and recession) she said, “Could we tip into phase four? In some markets, but I don’t think so.”

“Vacancy is slightly higher than the average for the past 10 to 15 years of 5.7,” Betancourt said of the rate for Q1 2024, which was 6%. “During the Great Recession, we were at about 8% — and we’re nowhere near that.”

“Our forecast is that vacancy will go to 6.25% later this year because a lot of new supply is coming online,” she added. “Why won’t it get worse? It won’t get worse because of job growth. We’re anticipating that job growth is still going to be positive.”

Cap rates hit 5.7% in the first quarter, Betancourt said, adding, “in 1982 they were 12%.”

Multifamily values have dropped by nearly 18%, but this was after a once-in-a-lifetime surge of 99%, she noted. “This is another reason not to panic, because even if we drop 20%, you’re still up 80%,” she added.

“Why am I not panicking about multifamily?” Betancourt asked. “Here’s why: demographics.”

“The people ages 20 to 34 years old are the people most likely to rent apartments. Overall, we’ve got a lot of these 20- to 34-year-olds, and they’re going to be around a long time,” she said. “The demographics for multifamily are so compelling, this is why I feel pretty good about multifamily over the long term.”

“We focus so much on job growth for multifamily because we’re counting on those 20- to 34-year-olds to get a job and form a household,” Betancourt said. “These young people are not going to live in their parents’ basements forever.”

Betancourt reminded the audience that market dynamics can be different in each specific market. “Some markets that are undersupplied, they’re doing very well and seeing rent growth,” she said. “Look at the non-performing markets—what do they all have in common? They have a lot of supply, supply that’s come online last year and this year.”

“New construction is declining and it takes two to three years to build a new multifamily,” Betancourt said. “If we are at peak supply right now — with a million units on the way — what do you think that means for 2026? It means a shortage of supply.”

“We’re already undersupplied,” she added. “From multifamily to single-family rentals, we’re already undersupplied by 3 million to 6 million units. We can see the shortage coming, but it’s in slow motion.”

Fannie Mae’s chief CRE economist conceded that net operating income “will be at zero for a quarter or two.”

“But it’s not the end of the world if you really think about it, considering how much we had,” she added.

“We’ve got debt funds, we’ve got real estate equity funds. We’ve got a lot of dry powder,” Betancourt said. “People aren’t looking for deals —they’re waiting, so that’s another reason why I’m not panicking.”

The weather outside was still cloudy, but the mood in the room seemed to lighten a bit, especially when our keynoter put a smile on everyone’s face:

“Maybe we should rename this session: ‘Thank God we’re not in the office sector,’” she said.