The multifamily market is expected to stabilize during the back half of 2025, according to economists from the National Association of Home Builders (NAHB) and CoreLogic. During the “2025 Multifamily Market Outlook” panel at the International Builders' Show, NAHB assistant vice president for forecasting and analysis Danushka Nanayakkara-Skillington shared the NAHB’s projection that multifamily starts will decrease by 11% to 317,000 in 2025.
Starts activity in 2024 declined significantly—by 24%—but the magnitude of the decline was smaller than NAHB’s initial projections. Multifamily starts are projected to rebound in 2026 and increase by 6% to 336,000.
“NAHB is projecting that multifamily construction will decline again in the first half of 2025 before moving back to long-term trends toward the end of the year as the market works through a substantial number of units under construction,” said Nanayakkara-Skillington.
Mixed Outlook
The mixed outlook for the multifamily market is reflected in the NAHB’s Multifamily Production Index (MPI), which generated a reading of 48 in the fourth quarter of 2024. While a seven-point increase compared with the same period the prior year, the index is still below the break-even point of 50. Nanayakkara-Skillington said the index was weighed down by a pessimistic outlook from high-rise and condo developers, while garden-style developers carried a more optimistic outlook.
“The MPI is reflecting cautious optimism with a reading of 48, and it is what we would expect given that multifamily starts declined in 2023 and 2024,” said Nanayakkara-Skillington.
Heading into 2025, several supply-side challenges rank as the most significant concerns for the multifamily sector. The cost and availability of developed lots, the cost and availability of labor, and building material prices ranked as the top three concerns for developers in the year ahead, according to a survey conducted by NAHB.
Despite supply-side concerns and headwinds, the multifamily sector is supported by the low national unemployment and positive demographic trends. Employment is particularly strong among the cohort between the ages of 25 and 34; at the same time, the share of such individuals living with their parents remains elevated.
“Pent-up demand for multifamily housing will continue to build as these young adults move out of their parents’ homes,” said Molly Boesel, senior principal economist at CoreLogic.
High supply levels have helped push multifamily rents down 1% at the end of 2024. However, Boesel suggested that as completions slow throughout 2025, vacancy rates will fall and rents should begin to increase.
New Administration
During the session, Nanayakkara-Skillington highlighted the potential impacts of actions by the Trump administration to the overall economy and multifamily sector. The likely expansion of the 2017 tax cuts and projected GDP growth will both positively impact the industry—as will efforts to cut down on regulatory costs, which the NAHB estimates account for 41% of multifamily development costs.
However, the likely increase of the federal deficit and persistent inflation will be headwinds for the housing industry. The potential impacts of tariffs on Canada, China, and Mexico could also worsen building material costs moving forward.
Additionally, the immigration policy of the Trump administration is likely to impact the housing industry in 2025 on both the supply side—due to the large number of non-U.S.-born workers in the trades—and the demand side.
