Momentum is building in the multifamily market, especially on the demand side, as inflation has improved, the labor market has remained resilient and interest rate cuts appear imminent. Multifamily fundamentals are turning a corner and will likely be boosted by strong demand going into the second half of the year, according to a Cushman & Wakefield multifamily report.

In its latest U.S. Multifamily MarketBeat, Cushman & Wakefield noted that the US multifamily vacancy rate declined during the second quarter for the first time since 2021. Vacancy dropped 10 basis points during the quarter. In addition, absorption grew to nearly 140,000 units during the second quarter, the fourth-highest rate since 2000. That figure was surpassed only by the first three quarters of 2021, the firm said. Through the first half of this year, absorption matched all of 2023's demand.

Demand is strongest in the Sun Belt, which grew by 100,000 units this year, more than 2% of the region's inventory. However, construction starts nationwide have fallen, with only 103,000 units breaking ground this year. This represents a decrease of 60% from last year. If supply remains diminished and demand remains strong, current supply should be absorbed over the next 18 to 24 months, said the report.