The multifamily market started 2020 on solid ground and experienced nearly 10 years of above-average growth. However, the first half of 2020 is essentially the tale of two economies: the pre-pandemic economy and the economy of the pandemic’s first three months in the U.S. The unprecedented nature of this crisis will impact the housing market, but to what extent is still being played out. However, because of weakened economic drivers, multifamily fundamentals are expected to slow throughout the rest of this year and possibly into next year.


The labor market was on strong ground before the pandemic hit in March. The economy added 2.3 million jobs in the 12 months ending February 2020 and the unemployment rate continued to tighten down to 3.5%. During the second quarter, the unemployment rate peaked in April at 14.7% with 23 million out of work. In May and June, employment started to rebound, adding 7.5 million jobs since April. First quarter gross domestic product (GDP) fell by 5% while second quarter dropped 32.9%. March and April were one of the most volatile economic times in history. While unemployment is improving as the economy begins to recover, it is expected to remain elevated for the foreseeable future.

Volume and Originations

Investment activity has slowed in March but since June, our volume has increased compared with the start of the year as we provide the market with liquidity when other market participants moved to the sidelines. Cap rates remained relatively stable as interest rates dropped and cap rate spreads increased. Quarterly price appreciation was relatively flat; little movement in property prices indicate that market perception of the multifamily asset class continues to favor longer-term fundamentals. Given the volatile few months since the pandemic, some impact to property prices is expected this year but not as severe as the Great Recession.

Total multifamily origination volume is expected to slow in 2020, but the extent to which is still uncertain. We estimate volume it could slow by -20% to -40% this year – the magnitude of which is dependent on the recovery trajectory and how well the virus can be contained.

Demand and Supply

Multifamily demand in the second quarter saw a meaningful slowdown given the nationwide shutdown, but at the same time saw a high rate of lease renewals as tenants remained in their units during the height of the lockdown. Slower completions this year will help offset some of the reduced demand. Reis reports completions are tracking lower this year by at least 30% compared with pre-pandemic levels. With less units expected to be delivered over the year, that may provide some relief to rents and vacancies that will be impacted from a slowdown in demand.

Multifamily Growth

The pandemic-induced recession in 2020 will continue to drive changes in macroeconomic and multifamily forecasts for the remainder of the year. Rent growth is expected to slow and vacancy rates increase for the rest of the year due to the higher unemployment and reduced income: rents are anticipated to be down -1.2% to -1.7% while vacancy rates could increase 200-250 basis points. Declining income growth and collections are not estimated to impact well-positioned properties, especially given the solid footing the industry was entering the recession with, with several years of above-average income growth and property price appreciation.

To learn more about our forecast, including analysis of specific metros and details on growth projections, please read the full Midyear Outlook Report.