The single-family housing market may be grabbing headlines with its record-high demand, bidding wars and record-shattering prices, but it has also spurred a development that is good news for multifamily investors: all-time-high multifamily rental rates. In October of 2021, multifamily rents across the U.S. peaked at an average of $1,572 per month, according to Yardi Matrix’s Multifamily National Report. The spike in rent is tied directly to the massive unmet demand for single-family homes. As a result, people who want to buy a house (and who would, in fact, be buying in a more conventional housing market) have been forced to wait and continue renting.

Between March and October of 2021, multifamily rents increased an average of $179 per month, roughly the same as the increase over the five previous years combined. While this accelerated increase in price is not expected to be the new norm, all economic indicators point to rents continuing to rise. Experts do anticipate that we could see rents flatten between now and March, which reflects the typical slowdown the multifamily industry sees from September through March, but some metropolitan areas are bucking that trend.

Across the nation, multifamily asking rents have increased year-over-year at an average of 10.3% while many markets have seen prices increase well above that. In Phoenix, multifamily rents increased about 26% year-over-year. Tucson is close behind, with a 20% increase in rents. In both cities, rents in the multifamily sector are continuing to rise approximately 2% month-over-month.

For investors, this presents an opportunity.

While it’s difficult to anticipate how much multifamily rents will increase and in which markets, expert consensus is that this is not a bubble that’s going to pop. There is such an imbalance of housing supply and demand in the U.S. that over 5 million homes would need to be built in order to meet the current needs of homebuyers. With material supply chain issues and a labor shortage continuing to hamper construction companies, it seems unlikely that this demand will be met in the near future.

Multifamily properties are poised to reap the benefits of this shortage. As of August, apartment occupancy hit a record high of 97%. This is due to the scarcity of housing inventory combined with the re-emergence of a large number of renters who had been forced to move in with family during the pandemic, but who are once again able to rent their own apartments.

Just as multifamily rents have seen massive jumps, the economic demographics for multifamily renters are shifting too. One example: Annual household incomes for new multifamily renters hit an all-time high this year of over $70,000. And investors are taking notice.

Among all types of commercial real estate, multifamily properties saw the most investment this year, to the tune of $92 billion. With demand continuing to far outweigh supply, this sector is poised to remain one of the hottest investment opportunities for the foreseeable future.