The multifamily housing sector is off to a difficult start in 2025, as revealed by the January 2025 NMHC Quarterly Survey of Apartment Market Conditions.

Key Findings

The survey’s four primary indices—Market Tightness (40), Sales Volume (41), Equity Financing (48), and Debt Financing (32)—all fell below the neutral benchmark of 50, signaling deteriorating conditions in Q4 2024.

The Situation

A historic wave of new apartment deliveries in 2024, the largest since 1974, has increased competition and put downward pressure on both rent growth and occupancy rates, particularly in Sunbelt markets with high levels of new supply.

Economic Impact

Higher interest rates are amplifying challenges in capital markets. The Federal Reserve has indicated that rates will remain elevated through 2025, with minimal reductions expected. Since October, a 58-basis-point increase in the 10-year Treasury yield has driven up borrowing costs, slowing transaction activity.

Key Insight

  • Regional Impact: The Sunbelt, once a leader in demand-driven growth, is now grappling with the effects of oversupply.
  • Market Dynamics: Elevated borrowing costs are creating obstacles for developers and investors, reducing overall deal flow nationwide.

Bottom Line

The multifamily sector faces a tough environment as record-high supply and constrained capital markets weigh heavily on growth and investment activity.

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