Investors continue to view the multifamily sector as part of the “most favored” asset classes, second only to the industrial sector, according to Kimberly Byrum, Zonda’s managing principal of multifamily advisory during Zonda’s Multifamily Market Update: From Dirt to Doors on August 12, 2025.
Many investors and developers, though, are in “wait-and-see mode” as they watch the positive slowdown in the delivery pipeline but are wary about job growth.
“Raising equity continues to be somewhat of a challenge,” Byrum says, with most investors still focused on the senior position in the capital stack. However, a recent survey by the National Multifamily Housing Council (NMHC) found that some developers are finding it a little easier to raise capital. However, investors are very focused on current rents and future rent growth along with concessions.
On the debt side, multifamily mortgage originations were up 39% during the first quarter of 2025 compared to the first quarter of 2024. Credit conditions appear to be stabilizing, but the cost of credit has been volatile.
Transactions have been relatively flat in 2025, with both buyers and sellers anticipating more favorable market conditions in the future. For now, that leaves them at a stalemate, Byrum says.
“There’s been more sales activity in secondary markets such as Salt Lake City and Colorado Springs, with more improvement and activity in the West,” Byrum says.
Some of the markets where transactions have slowed most so far this year include Austin, Boise and Coastal Florida.
Multifamily Fundamentals to Watch
The good news for the multifamily sector is that the overabundance of deliveries will continue to fall – down almost 50% in 2025 compared to last year.
“We’ve seen amazing absorption rates in the 95% range during the first half of the year,” Byrum says. “Absorption rates are likely to be around 94% for the next few years as job growth slows.”
The biggest concern for the multifamily sector is job growth. Byrum reviews multiple job reports to develop a consensus of forecasts. While job growth from 2011 to 2019, which Byrum calls the “stable period” for the economy, was 1.6%, a big slowdown in job growth is anticipated. She expects job growth to be 0.7% from 2025 through 2027.
Byrum forecasts that average asking rent growth is likely to be 3.9% in 2025, 3.8% in 2026 and dip to 2.9% in 2027 based on the positive impact of the pipeline slowing down offset by the negative impact of slower job growth. However, if job growth is 1% instead of 0.7% in 2027, she believes asking rent growth could be 4.5%.
“The biggest unknown we’re all watching is the job market,” she says.
Renewal rates are stronger than historical rates now, although not as high as during the peak of the pandemic, Byrum says. Asking rent growth has slowed, but renewal rates are strong, so Byrum says operators need to make sure their asking rents are aligned with their renewal rates.
One more fundamental that’s positive for the multifamily sector is the mortgage payment to income ratio, which peaked in 2024 up to 32%. Continued high home prices and elevated mortgage rates reduce the number of renters leaving to buy homes.
Markets to Watch in the South and Southeast
Byrum divides the markets in the South and Southeast into three categories:
- Flagship Metro areas, which have an average of 550,000 units, including Houston, Dallas, Atlanta, Austin and Miami.
- Growth Metro areas, which have an average of 230,000 units, including Tampa, Orlando, Charlotte, Fort Worth, San Antonio, Fort Lauderdale, Raleigh, Nashville and Jacksonville.
- Next Horizon Metro areas, which have an average of 70,000 units but are growing, including Greenville, S.C., Sarasota and Fort Myers.
The majority (70%) of these markets anticipate declining supply over the next six quarters. However, some of these markets still have excess inventory. On average, these markets have an additional 25% in excess supply to absorb along with new supply.
The Flagship Metro areas are poised for a resurgence in the multifamily sector, Byrum says, while the Growth Metro areas and New Horizon Metro areas have slower absorption rates. Concessions in the South and Southeast are anticipated to peak this year at an average of $256 per month before declining to $204 in 2026 and $178 in 2027. The low point for concessions was 2022 at $126 per month when demand was high and the supply pipeline was smaller. Concessions are highest in the Growth Metro areas that continue to struggle with too much supply. Concessions are primarily on new buildings, not on stabilized buildings.
Byrum also listed submarkets that are highly desirable and therefore locations where there’s been intense competition among developers. The metro areas with the top 20 high pipeline submarkets include Austin, Charlotte, Dallas, Tampa, Fort Lauderdale, Houston, Miami, Nashville, Orlando and Raleigh. Sixty-five percent of those high pipeline submarkets are in the suburbs, with the other 35% in urban areas of those markets.
Other markets outside the South and Southeast with a longer than average lag in absorption rates include Las Vegas, Salt Lake City, Denver and Phoenix.
Byrum suggests that investors watch Flagship Metro markets in the South and Southeast, along with Denver, the Bay Area and Washington, D.C. as they will lead the recovery and represent resilience in the multifamily sector.
The information provided in this article, including, without limitation, any opinions, predictions, forecasts, commentaries or suggestions, is for informational purposes only and should not be construed to be professional or personal investment, financial, legal, tax or other advice.