The multifamily housing sector is expected to experience steady, if unspectacular, growth in 2025, according to Yardi Matrix’s Winter Multifamily National Report. While rents are set to rise moderately, sales activity is likely to remain subdued amid ongoing economic challenges.
Yardi Matrix forecasts a 1.5% national increase in multifamily advertised rents in 2025, driven by sustained demand in regions like the Northeast and Midwest, where supply growth is constrained. However, the pace of rent increases continues to slow significantly from the post-pandemic boom.
Between 2021 and 2022, multifamily rents soared by a combined 21.4%, fueled by surging demand. By contrast, rent growth in 2023 and 2024 totaled just 1.9%, with 2024 alone posting a modest 1.0% rise.
Affordability Challenges Bolster Demand
Key factors sustaining demand for multifamily housing include limited affordability in the for-sale housing market. Elevated 30-year mortgage rates, which peaked at 7.4% in late 2023 before settling in the mid-6% range by December 2024, continue to place homeownership out of reach for many Americans.
Despite the Federal Reserve’s interest rate cuts in the fall of 2024, the average rent of $1,783 in the third quarter remains far below the typical mortgage payment of $2,416. This disparity keeps would-be buyers renting longer, further underpinning demand in the multifamily sector.
Construction Slowdown on the Horizon
Although 2025 will see significant new multifamily deliveries, the pipeline is beginning to tighten. After a record 550,000 units came online in 2024, the report anticipates a slight decline to 508,000 units in 2025, adding 3.0% to the total U.S. stock.
Markets expected to see the most significant increases in stock include Austin (7.3%), Charlotte (6.2%), and Nashville and Phoenix (both 6.1%). Other fast-growing metros like Raleigh-Durham (5.4%), Denver (4.9%), and Miami (4.2%) will also see notable expansions.
The largest absolute delivery volumes in 2024 were concentrated in Dallas-Fort Worth (32,600 units), Phoenix (23,200), and Austin (23,100), with similarly high levels expected in these markets for 2025.
However, as construction starts slowed during the latter half of 2024, the report anticipates a more pronounced decline in new multifamily deliveries in 2026 and 2027.
Sales Activity Remains Tepid
The multifamily sales market has struggled to regain momentum, despite a brief surge when interest rates dipped. Through October 2024, $62.7 billion in multifamily properties changed hands, mirroring the previous year’s volume.
Rising rates and uncertainty about future income growth are expected to keep transaction activity muted in 2025. Investors remain cautious as another 500,000 units are delivered before the impacts of slowing starts become apparent.