I’ve been watching the multifamily housing market closely—and this rebound feels different. Is it just a temporary lift, or the start of a bigger realignment? Either way, smart investors and real estate agents can’t afford to ignore the signals.

Why the Multifamily Market Is Rebounding in 2025

According to a recent update from CBRE (June 2025), the U.S. multifamily market is showing strong signs of recovery after a sluggish 2024. National vacancy rates dropped by 40 basis points in Q1 2025, and rent growth stabilized in key metros. This rebound is being fueled by improved economic confidence, easing mortgage rates, and slower new construction starts.

What This Means for the Market: Expert Takeaways

1. Mortgage Rates Are Doing Some Heavy Lifting

With the Fed signaling rate cuts and 30-year fixed mortgage rates dipping below 6.5%, more people are reevaluating the rent-vs-buy equation. But here’s the twist: not everyone is jumping to buy. Investors are stepping in to meet demand from renters who still can’t clear the hurdles of down payments and closing costs. That’s keeping multifamily properties in play.

Why it matters: Lower borrowing costs are bringing new life to financing deals—and lenders are getting more aggressive in their terms. This shift is giving multifamily buyers more leverage and improving cap rate performance.

2. Supply Is Lagging Behind Demand—Again

The post-pandemic construction surge has faded. Multifamily completions are down nearly 15% YoY, just as population growth and migration patterns (especially in Sun Belt markets) reignite rental demand. Cities like Orlando, Phoenix, and Dallas are seeing vacancy rates drop faster than expected.

Why it matters: Less new inventory + rising demand = pricing power for landlords. It also means investors who buy now could benefit from rental inflation over the next 12–18 months.

3. Tax Savings Are a Quiet Driver of Returns

Many investors overlook the role of depreciation and interest deductions in multifamily investing. But in 2025, those tax benefits are playing a bigger role—especially as 1031 exchange activity picks up. With higher property taxes and inflation still a concern, these tax shields are keeping net returns attractive.

Why it matters: If you’re working with a real estate agent or advisor, make sure they understand how to model after-tax returns—not just gross yield.

4. Institutional Interest Is Trickling Back

While the “big money” mostly paused in 2024, Q1 2025 has seen renewed interest from REITs and private equity groups. They’re moving slowly, but signals are clear: the bottom may be behind us.

Why it matters: As institutional demand grows, competition for Class A and well-located Class B assets will heat up. Smaller players who act now could find better deals before prices start climbing again.

What Should You Do Now?

Whether you’re a seasoned investor or someone considering a multifamily investment for the first time, here are smart moves based on today’s landscape:

• Buyers: Lock in lower mortgage rates while they last. Use platforms or lenders offering rate locks to hedge against volatility.
• Investors: Focus on secondary markets with high in-migration and limited new supply. Think Columbus, Tampa, or Raleigh.
• Real Estate Agents: Highlight the tax savings of multifamily ownership—especially with investor clients. It’s a hidden value lever many overlook.
• Lenders: Educate clients about creative financing options (e.g., DSCR loans, portfolio loans). These can be game-changers in tight markets.

Micro Explainer: What Is a Cap Rate and Why Does It Matter?

What is a “cap rate”?

A capitalization rate, or “cap rate,” is a measure used to estimate the return on a real estate investment. It’s calculated by dividing a property’s net operating income (NOI) by its current market value. The higher the cap rate, the better the potential return—though it may also signal higher risk.

One Last Thought 

I’ve said it before—multifamily real estate isn’t just about doors and leases. It’s about understanding the levers behind value: mortgage rates, tax advantages, and market timing. If you’re not modeling deals with both numbers and narratives, you’re leaving insight on the table.

Platforms that combine underwriting tools with real-time market data can help you move faster—even without a full investment team behind you.

Reader Q&A: What You Might Be Wondering

Are rising mortgage rates still a risk in 2025?

Yes, but current indicators suggest rates will hold or drop further this year. Watch the Fed closely.

How do I know if a multifamily deal is overpriced?

Check cap rate trends in that zip code, review rent comps, and factor in deferred maintenance or high property taxes.

Do I need a real estate agent for a multifamily deal?

Absolutely—especially if you’re new. A seasoned agent helps you evaluate the neighborhood, price trends, and zoning issues.