Multifamily Market Trends 2024-2025: A Snapshot of Key Metrics

Look ahead to the multifamily market in 2025 with Duckfund’s in-depth analysis of current market conditions.

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Below is supporting research to the above infographic.

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1. Stabilizing vacancy rates

Vacancy rates in the multifamily sector have been increasing slightly (Fig.1), with current levels hovering around 5.8% as markets approach a stabilized range of 6 to 6.25% (Fig.2). This increase reflects a normalization process following record-low vacancies during the pandemic housing surge. 

Freddie Mac’s outlook notes that demand for rental housing remains strong, supported by limited new construction and high barriers to homeownership due to elevated mortgage rates​.CBRE agrees stating: “Vacancy rates have now peaked in many of markets as renter demand exceeds new supply growth.”

CBRE also highlights a recovery trend in high-supply markets like Austin and Dallas (Fig 3.), where vacancy rates are stabilizing as absorption improves. The decline in multifamily completions since mid-2022 has helped reduce the oversupply risk, keeping vacancies at manageable levels even in competitive markets​

Migration trends and the affordability gap between renting and buying contribute to sustained rental demand, particularly in urban cores and growth markets like Phoenix and Raleigh.

Looking ahead, 2025 may bring further stabilization as supply and demand align more closely, though local variances will continue based on market fundamentals and tenant preferences.

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Stats

Fig. 1. 

                                                      Source: Moody’s

Fig 2.

                                               Source: Fannie Mae

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Fig 3.

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                                                   Source:: CBRE

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2. Moderate rent growth

Rent growth in 2024 is expected to moderate, settling between 1%-2.7% nationally. This represents a significant deceleration compared to the rapid increases seen in 2021 and 2022. According to Fannie Mae, rent growth is stabilizing as vacancy rates normalize, with limited new supply acting as a buffer against sharper declines​ (Fig. 4).

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High-cost markets, particularly those with robust employment growth, are expected to outperform, while weaker regions may see stagnation or slight declines.

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The CBRE report underscores the role of affordability pressures, with middle-income renters being particularly sensitive to even modest increases​.

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Long-term, rising rents will hinge on the interplay between several factors including:

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• Tenant demand
• Wage growth
• Housing supply

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The impact of rent stabilization policies in select markets could also play a growing role in shaping growth trajectories​, according to Forbes.

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Fig. 4

                                              Source: Fannie Mae

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3. Valuations to taper amid rent growth slowdown

Valuations in the multifamily market have seen fluctuations as cap rates adjust and rent growth stabilizes. High interest rates are exerting downward pressure on valuations by increasing borrowing costs and tempering investor demand. 

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CBRE indicates that property values are holding steady, with an index range of 80-90 (Fig. 5), reflecting stability in prime and secondary markets​.

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A recent JPMorgan report highlights that valuations are being supported by strong fundamentals in high-growth areas and a persistent shortage of affordable housing. 

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Fannie Mae points out steady future NOI as further support for valuations. (Fig 6). However, as rent growth slows, there’s less upward momentum for valuation increases. 

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Going forward, investors are likely to focus on income-generating properties in resilient markets, with valuations increasingly tied to net operating income (NOI) performance and regional economic conditions. 

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Fig 5

                                  Source: Moody’s

Fig 6. 

                                    Source: Fannie Mae

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4. Cap rates reflect market conditions and investor sentiment

Cap rates, currently between 5.4%-6%, (fig.7) are a critical indicator of investor sentiment and multifamily property performance. Higher interest rates have caused cap rates to rise from their 2021 lows, reflecting increased risk premiums and higher financing costs​

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Despite this, Freddie Mac and CBRE note that strong demand for rental housing and limited supply growth have helped keep cap rates relatively stable compared to other real estate sectors.

In growth markets like Phoenix and Charlotte (Multifamily Executive), cap rates are lower due to strong investor demand and favorable demographic trends. Conversely, oversupplied or slow-growth markets may see cap rates rise further as properties face challenges in generating competitive returns​

Looking ahead, cap rates are likely to remain influenced by broader economic conditions, particularly the Federal Reserve’s monetary policy and inflation trends. Investors may also shift focus toward long-term growth prospects, prioritizing markets with sustainable rent growth and stable vacancy rates.

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Fig 7.

                                          Source: Fannie Mae

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