Yardi Matrix Q1 2023 Multifamily Supply Forecast: A Mixed Outlook

In their Q1 2023 update, Yardi Matrix has adjusted their multifamily supply forecast, with increases for 2023 and 2024 and decreases for 2025 and 2026. The forecast suggests new supply will bottom in 2026 and modestly increase year-over-year for 2027 and 2028.

Near-Term Forecast: 2023 and 2024 For 2023 and 2024, forecast completions have been increased by 2.3% over the Q4 2022 forecast. The Lease Up and Under Construction pipeline continues to expand, totaling 999,178 units in December. In December, 374,200 units in the Yardi Matrix database had a Lease Up status, slightly below the trailing 12-month average of 392,800. These units will most likely complete in the first half of 2023.

The number of under-construction units tracked by Yardi Matrix rose to 624,978 in December, a 35% increase over December 2021 and a 77% increase over pre-pandemic levels. Most of these units will complete in the second half of 2023 or 2024. Multifamily construction starts have been relatively stable since Q2 2021, suggesting the increase in under-construction inventory is driven by elevated completion times.

Long Term – 2025 through 2028 For 2025 and beyond, Yardi Matrix forecasts a reduction in new supply in 2025 and 2026, with a gradual recovery in new supply for 2027 and 2028 to levels slightly below the current cycle highs. This is primarily driven by the expectation of a mild recession in late 2023 or early 2024, which will reduce multifamily construction starts over the next two years, depressing completions in 2025 and 2026.

Compared to the previous quarter, the Q1 2023 update has decreased forecast completions in 2025 by 2.6% to 424,270 units and decreased 2026 forecast completions by 4.8% to 414,818 units. New supply increases to roughly 425,000 units in 2027 and expands to approximately 435,000 units in 2028.

The number of planned units in December 2022 stood at 1.09 million units, a 20.5% increase over year-ago levels and a 6.3% increase over the 1.03 million planned units identified in September 2022. Post-pandemic, the trend has been a steady expansion of the planned pipeline as multifamily development has picked up and supply constraints elongated completion times.

Bottom Line Yardi Matrix expects around 440,000 units to be delivered in 2023. Continued growth in the under-construction pipeline suggests annual deliveries will expand to approximately 460,000 units by 2024. An expected downturn in the national economy will depress construction starts later in 2023 and 2024 and new supply starting in 2025. Strong multifamily fundamentals will limit the extent of the downturn, with new supply deliveries bottoming in 2026 at approximately 415,000 units. A gradual recovery in new supply starts in 2027 and continues into 2028.