Multifamily Construction Starts Down 50%

Multifamily development has continued to decline during the third quarter, with new construction starting bottoming out at an annualized rate of 325,000 units, according to Yardi Matrix’s third-quarter multifamily forecast. However overall activity is declining at a slower rate than previously expected.

Construction starts are down 50% from 2022 and early 2023, but because completion timelines are elevated, the construction pipeline is still sizable, said Yardi Matrix. Multifamily completions are expected to remain elevated next year and into early 2026 before they begin to cool off during the second half of 2026. As such, Yardi Matrix increased its Q4 2025 forecast by 8.1% to 508,089 units and its 2026 forecast by 6% to 371,509 units.

From September 2023 to June 2024, the under-construction pipeline was at or above 1.2 million units, with 567,997 of those in lease-up, according to the report. That represents a 9.7% decline in lease-up units quarter-over-quarter but a 5.5% increase year-over-year. Units under construction but not in lease-up increased 2.7% quarter-over-quarter to 595,945. This category peaked at nearly 700,000 in November 2023.

Under-construction inventory has dropped off the most in the Sun Belt and expanded in multiple markets in the Northeast and California. Days in construction remain elevated, with both garden and mid-rise build types at or near series highs. For Q3 2024, average garden-level property completion times stood at 688 days, a series high and above the trailing four-quarter average of 676 days. This represents a 12.1% increase over 2019’s average days in construction for garden properties, according to the report.

Mid-rise properties on average spent 741 days in construction, slightly above the trailing four-quarter average of 740 days, but below the series high of 770 days set in Q3 2022. Completion times for high-rise properties averaged 815 days in Q3 2024, below the trailing four-quarter average of 836 days. High-rise days in construction peaked in Q1 2021 at 1,042 days.

Yardi Matrix does not anticipate new development will significantly rebound until 2026. The firm expects supply to bottom at 327,000 units in 2027, with a rebound taking place in 2028 and 2029 to around 2.25% of the stock, or approximately 405,000 units in 2028 and 426,000 units in 2029.

The combined planned and prospective pipelines currently contain 4.27 million units. The planned pipeline has been essentially flat for more than a year. In May 2023, this category contained 1.1 million units for the first time and since then, it has averaged 1.1 million units. At the close of Q3, the planned pipeline contained 1.11 million units, a 0.9% decrease quarter-over-quarter and a 0.3% increase year-over-year. The prospective pipeline grew 1.2% quarter-over-quarter to 3.16 million units. On a year-over-year basis, the prospective pipeline expanded 9.3%.