OutlookThe U.S. multifamily housing market has shown remarkable strength in the first half of 2025. According to Yardi Matrix, strong renter demand nearly matched the surge in new supply, keeping national rents stable despite broader economic pressures. As affordability challenges persist—30‑year mortgage rates hover around 6.8% and existing home prices climbed 1.8%, many buyers are sidelined—fueling continued interest in rental properties.
1. Demand vs. Supply: A Critical Balance
High mortgage rates continue to pressure would-be homebuyers, preserving demand for rentals. Meanwhile, new construction began moderating after a wave of deliveries in 2024. Yardi Matrix reports that reduced units coming online are stoking optimism for renewed rent growth, predicting moderate increases of 1.5% in 2025, 1.1% in 2026, and a stronger 2.7% in 2027—potentially reaching 3–3.5% by 2028.
2. Bounce‑back Post‑2024 Surge
Despite record deliveries—555,000 apartment units leased in 2024 (3.4% of overall stock)—absorption rates remained high, indicating tenant demand kept pace. Although over 500,000 units are expected in 2025, new construction starts have fallen nearly 50%, signaling supply will tighten into 2026.
3. Regional Rent Divergence
While national rent growth holds around 1%, regional performance varies significantly. Sun Belt markets, bracing large new supply, are experiencing tenant slumps. For example, from January 2023, Austin rents plummeted 11.2%, Phoenix 6.5%, and Orlando/Atlanta each dropped 4.1%. Conversely, cities with constrained supply like New York (+13.5%), Kansas City (+9.4%), Columbus (+9.2%), Chicago (+9.0%), and New Jersey (+8.5%) are outperforming.
4. Economic & Policy Headwinds
Multifamily segments remain robust, but Yardi cautions that broader economic risks—like rising tariffs, financial-market volatility, immigration shifts, and tightening construction rules—could impact performance. The report emphasizes that interest rates will remain elevated due to the tension between slow growth and inflationary pressures
What Lies Ahead?
• Rising Rents on the Horizon
With absorption holding firm and supply tapering off, rents are likely to rebound by late 2025 or 2026, especially where delivery slows most.
• Investors Favor Stability
Multifamily’s resilience has drawn powerful investor interest thanks to stable rent rolls, strong cash flow potential, and government-backed financing, creating a buoyant lending environment.
• Geographic Nuances Matter
Savvy investors and developers will likely pivot toward markets with constrained supply and strong demand, avoiding Sun Belt hotspots in oversupply risk.
• Policy and Economic Vigilance
Stakeholders need to watch macro risks—trade policies, construction regulation, and inflation futures—all of which could dampen growth or squeeze margins.
Bottom Line
Yes, resilient multifamily performance is likely to continue—at least in the near term. High interest rates, constrained supply, and persistent rental demand form a strong foundation for continued strength. But regional disparities and macroeconomic challenges will shape where and how performance plays out.
For landlords, developers, and investors: targeting markets with controlled supply and strong tenant fundamentals remains key. Portfolio diversification—balancing Sun Belt exposure with high-barrier gateway cities—can help manage risk tied to regional imbalances.
