Ali Wolf is chief economist for Zonda, parent company of Multifamily Executive, where she manages and analyzes content for the firm, provides data analytics, runs special research projects, and does presentations across the country on topics spanning both the housing market and the wider economy. Wolf weighs in on what the multifamily industry could expect in 2025.
What is Zonda’s forecast for the multifamily industry in 2025?
The industry is facing two realities: completions and starts. In the single-family market, builders can release homes at different stages of construction, allowing for more dispersed risk. In the multifamily market, new completions come in batches. As such, the elongated construction timeline experienced during the height of the pandemic is still impacting the apartment market. For example, completions came in near a 30-year high in 2024 and are anticipated to remain elevated in 2025. We expect to continue to see lower occupancy rates, select rent drops, and increase concessions in parts of the Sun Belt as a result.
As the industry adjusts, our expectation is for multifamily housing starts to remain depressed in 2025 at 340,000. While this does represent growth from 2024 (3.7%), it keeps overall starts at 2017 levels.
Our multifamily advisory team, led by Kimberly Byrum, has seen an uptick in predevelopment work, though. This suggests interest from developers who are beginning to plan now to position themselves to start more homes in the latter part of the 2020s.
The industry has seen record supply, do you think demand will continue to keep pace?
In the Midwest, Northeast, and California, yes. That’s because we haven’t seen the lift in supply like in other parts of the country. In the Sun Belt, demand is expected to remain strong, but developers should expect a competitive landscape.
What potential factors could hamper the multifamily sector in 2025?
Increased construction costs (potentially from tariffs), mass deportations that could impact the labor supply, and/or a pickup in people converting from renting to owning could hamper multifamily activity in 2025.
What are the bright spots for the industry?
There are three that come to mind.
- The high level of apartment demand, strongly supported by millennials and older Gen Zers;
- The rent versus own premium and the accompanying high renewal rates at apartment complexes; and
- The economy. While we aren’t adding jobs as quickly as in the past, the labor market is holding up quite well.
What are key economic indicators the multifamily industry should be tracking?
Besides some of the factors I already mentioned, occupancy, concessions, home price growth, and wage growth come to mind.
What do you anticipate with the build-to-rent (BTR) market in the coming year, and what impact will that have?
At a high level, we expect 2025 to be somewhat of a pivot point for the BTR sector. Many of the biggest markets are working through their pipeline of project and unit deliveries (similar to traditional multifamily).
As such, we believe more deals will start to be underwritten and more capital will come into the space as developers look to bring communities online in the next two to three years once the deliveries have been worked through and the cost of capital slowly comes down.
Do you expect the rent versus own gap to shrink in 2025?
It should, if mortgage rates trend down as many expect. The wild card is the incoming Trump administration. A lot of President Trump’s plans are pro-growth, which should be good for the labor market and GDP but would also correspond with higher mortgage interest rates.
If mortgage rates do come down, but only modestly, the rent versus own gap may narrow, but the math will still heavily favor renting in most markets.
New year’s resolution?
While I don’t do new year’s resolutions, there are habits I want to continue into 2025—working out while traveling for work is one of them!
