The U.S. multifamily market held steady during the third quarter of 2023, as high mortgage rates and a lack of inventory in the housing market continued to drive rental demand.

Over the past year and a half, the Federal Reserve has embarked on one of its most aggressive monetary tightening cycles in history. With the federal funds rate sitting above 5.25% and two more Federal Open Market Committee (FOMC) policy meetings scheduled through the end of 2023, questions remain about how short- and medium-term monetary policy adjustments could influence multifamily investing. While a rapid reversal is unlikely, the next phase could ease some interest rate pressure.

Arbor’s Top Markets for Large Multifamily Investment Report 2023 is a roadmap for investors searching for the most desirable locations to invest $20 million or more. Developed in partnership with Chandan Economics, the study is a market-level comparison of the top 50 U.S. cities poised for apartment sector growth over the next year. This annual report pinpoints areas of opportunity at a time when economic headwinds have altered individual market dynamics.

Although headwinds persist, solid national economic growth and the strength of multifamily fundamentals indicate it’s time to recalibrate for a soft landing, write Ivan Kaufman, Arbor’s Chairman and CEO, and Sam Chandan, Founding Director of the C.H. Chen Institute for Global Real Estate Finance at the NYU Stern School of Business. Historically stable in times of adversity, the rental housing market is well-equipped to thrive in today’s evolving economic environment.

From California to Maui, the frequency and scope of wildfire events are rising, causing insurance markets and public agencies to reevaluate property in areas at risk for catastrophic damage. As a result, rental housing providers are seeing greater limitations to coverage, higher premium prices, and, in some cases, a total absence of viable private insurance — a trend detailed in the NMHC 2023 State of Multifamily Risk Survey and Report. This troubling new trend has placed many rental housing operators in a bind where they must simultaneously contend with the declining availability and affordability of insurance options.

More than halfway through 2023, the single-family rental (SFR) sector continues to demonstrate why it deserves the attention of multifamily investors.