Historically, for-sale housing affordability and multifamily vacancy rates have been correlated, though a causal relationship between the two is not always apparent.

In the early 2000s, looser mortgage credit standards spurred an increase in home ownership, while affordability held steady.  Multifamily vacancies rose as a result. The situation reversed in the early 2010s when housing became more affordable but fewer would-be homeowners qualified for a mortgage. Amid this dynamic, multifamily vacancies declined, and rents increased.

Nuances aside, the relationship between for-sale housing affordability and multifamily fundamentals is undeniable. The correlation mattered in 2004 and 2005 when housing became overheated and multifamily vacancies began to trend downward. (It should be noted that a wave of rental-to-condo conversions also played a role here.) Conversely, as for-sale inventory dwindled over the past decade and prices rose beyond the reach of many buyers, multifamily enjoyed a boom.

Today as mortgage rates spiral, the pool of creditworthy homebuyers has shrunk. Reduced affordability will likely bolster multifamily demand, providing a counterweight to the challenges multifamily investors will face from a weakening economy and burgeoning new supply. With the multifamily market remaining relatively tight, rents should continue to climb.