The multifamily rental market is showing signs of slowing down after a period of strong growth during the pandemic, according to economists at the National Association of Home Builders (NAHB) International Builders’ Show in Orlando. Factors such as demographic shifts, a weaker labor market, and rising vacancies are contributing to a more restricted development environment.
After three years of low activity, sales of multifamily properties increased by 15% in 2025 as new supply entered the market. This growth was seen across most regions, with 80% of metropolitan areas experiencing higher sales compared to only 20% in 2024.
Molly Boesel, senior principal economist at Cotality, said, “The regional sales shifts were notable, as we saw particularly strong growth in Midwest and California metros. Meanwhile, some Sun Belt markets that surged in 2024 posted declines in 2025.”
Persistent affordability challenges are keeping many renters from moving into homeownership. Increased supply led to a slight decline in multifamily rents—down 1% year-over-year—while single-family rent growth also slowed. Rents remained higher in cities with limited supply like Chicago, New York, and Philadelphia but fell in places with more available units such as Phoenix, Tampa, and Las Vegas.
Boesel noted that “The national multifamily vacancy rate ran up to a record high 7.3% in December. We're past the peak of a multifamily construction surge, but a healthy supply of new units is still hitting the market and colliding with sluggish demand, causing vacancies to continue trending up.”
Property values for multifamily buildings dropped by 4% in 2025 compared to the previous year and are now about 28% below their peak from 2022. However, these values remain above pre-pandemic levels.
Delinquency rates for multifamily properties have risen but remain lower than those for office buildings. Boesel explained that “Delinquency rates are rising due to higher interest rates, changes in property market fundamentals and uncertainty about property valuation.”
On the construction side, starts for new multifamily projects peaked at 547,000 units in 2022 before falling sharply to 355,000 units by 2024. A modest recovery is expected for 2025 with an estimated increase of starts by 16%, reaching around 413,000 units. Forecasts suggest further declines: down by about 5% to an annual pace of roughly 392,000 units in 2026 and another drop of about 6% to around 367,000 units by 2027—levels similar to those before the pandemic.
Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis said: “The multifamily market has slowed due to tighter financing and elevated construction costs and is moving towards a more constrained development environment. However, despite the pullback in starts, multifamily completions reached a 38-year high in 2024 with 608,000 units as projects initiated during the boom years were delivered to market.”
Larger properties now make up a greater share of new construction; buildings with more than fifty units accounted for over half (54%) of all completions last year—the highest proportion seen in decades.
Medium-density housing such as townhouses or small apartment buildings remains limited within current production trends. According to Nanayakkara-Skillington: The segment known as "missing middle" housing (apartments within two- to four-unit properties) has struggled since the Great Recession—only about three percent of all starts came from this category during the third quarter of last year.
All U.S. regions saw increases in completed projects during 2024:
- South: +37%
- West: +36%
- Midwest: +31%
- Northeast: +23%
Market confidence regarding new builds is improving based on recent results from NAHB’s Multifamily Market Survey (MMS). The Multifamily Production Index stood at forty-five—a slight decrease from last year—while occupancy sentiment remained strong; The Multifamily Occupancy Index was seventy-four.
Nanayakkara-Skillington added: “In addition to tight lending conditions and high construction costs, the local regulatory environment continues to be a major headwind to faster growth.”
Despite challenges such as tighter financing conditions and higher building costs—which industry professionals cite along with local regulations as ongoing obstacles—the sector may benefit from younger adults entering the rental market soon.
The National Association of Home Builders supports professionals working within residential construction through advocacy efforts aimed at promoting business success and housing growth; it provides education resources and networking opportunities while encouraging policies that support affordability according to its official website. As detailed on its site here, NAHB functions as both an advocate for innovation within home building and serves its members nationwide through events designed for professional development.
