With a steady performance during 2024, the multifamily market is expected to enter 2025 in good shape, according to a new outlook from Yardi Matrix.
Multifamily asking rents are expected to increase moderately in 2025 by 1.5% nationally. As seen in 2024, markets in the Northeast and Midwest will continue to lead in year-over-year growth with increased demand and a weaker supply pipeline. Rents in high-supply Sun Belt markets will continue to be weakened in the coming year.
With a large number of developments still under construction, supply growth will remain strong in 2025; however, the deceleration in starts in 2024 will stifle deliveries in 2026 and 2027.
“During a time of rapid supply growth in recent years, multifamily rents have been supported by equally strong demand,” noted the report. “We expect demand to continue to be robust in 2025, which will push rents higher as the supply boom starts to fade.”
While Yardi Matrix pointed to potential headwinds, including a changing political and regulatory environment, that could challenge its forecast, it said its base case remains that the demand drivers, such as demographics that favor household growth, positive employment gains, and the barriers to the for-sale market, will remain healthy.
Here are some other key findings from the Yardi Matrix outlook:
- New York is expected to lead the major markets in asking rent growth in 2025 at 3.1%. Other top markets to watch in the coming year are Chicago and Kansas City, Missouri at 2.6%; Washington, D.C., at 2.4%; New Jersey at 2.3%; and Boston and Indianapolis at 2.1%;
- 2025’s multifamily deliveries are expected to add 3% to the total U.S. stock. However, this supply pipeline is concentrated in the Sun Belt;
- The markets forecast to have the highest number of deliveries in the coming year are Dallas-Fort Worth with 32,603 units; Phoenix with 23,223 units; Austin, Texas, with 23,118 units; New York City with 22,756 units; Denver with 16,648 units; and Atlanta with 16,398 units;
- Austin is forecast to add the most, 7.3%, to its existing multifamily stock, followed by Charlotte, North Carolina, at 6.2%, and Nashville, Tennessee, and Phoenix at 6.1%;
- Gateway markets, other than New York and Miami, will see more moderate levels of delivery. Boston is expected to add 7,500 units, or 2.8% of its total stock, while Los Angeles is forecast to add 13,200, or 2.7% of its total stock, and Washington D.C., will add 14,300 units, or 2.4% of its total stock; and
- Multifamily transactions are expected to remain slow as investors will continue to be concerned about rates and income growth. About $62.7 billion of properties changed hands through October, which is on par with the same period in 2023.
