Three Trends Shaping the Multifamily Outlook

Given all of the reports and write-ups about the multifamily sector over the past five years, we know where we were and where we are now.

Where we were was a great deal of development. “Over the last five years, builders have added 2.1 million new units, increasing the multifamily stock by 11.2%,” said John Chang, Marcus & Millichap Senior Vice President, in a recent video.

Where we are now is that some markets, mainly in the Sun Belt, are working through a significant amount of supply, leading to sluggish rent growth and higher vacancies. Chang pointed out that Sun Belt metros experienced a 17.9% increase in apartment stock since the early 2020s, compared with a 7.8% increase in other areas.

Looking ahead, Chang commented that three trends will impact the sector.

#1—Tapering Construction

Tagging on to the building discussion above, Chang said that 50% of completions occurred in the Sun Belt metros, which experienced a 17.9% gain in apartment stock. In comparison, the inventory gain in other areas was 7.8%.

But the glut of supply is starting to be balanced by a slowing construction pace. Chang said that multifamily starts declined by 75% from its 2022 peak, meaning “the average vacancy rate in the major Sun Belt metros has leveled off at 6.3% for the first quarter,” he commented.

And while Austin, Charlotte and Nashville are working through their extra units, “markets like the Bay Area, Chicago and New York have had very little supply growth over the last five years,” Chang said.

He commented that the elevated supply risk for multifamily is a “localized short-term challenge.”

#2—Job Creation Slowdown

During 2024, the U.S. created an average of 122,000 jobs per month. But in 2025, that average fell to 9,700 per month. Chang said that the slowdown in job creation, combined with weak consumer sentiment, has put pressure on household formation. “That, in turn, has weighed on new apartment absorption,” he said.

As a result, the metros that generated high numbers of jobs during the last cycle, such as the aforementioned Sun Belt areas, scaled up apartment construction to meet demand. But as job creation has slowed, so has the pace of domestic migration and household formation to this region. While apartment demand in Atlanta, Dallas and Phoenix remains strong, “it’s not at the levels experienced in the early 2020s,” Chang said.

The slowdown in international migration is also impacting household formation and, by extension, apartment performance. “The combination of slowing job creation, weak consumer sentiment, dramatically lower immigration to the U.S. and slowing household formation will weigh on apartment demand over the short term,” Chang added.

#3—Growing Homeownership Costs

The above trends are short-term blips. The longer-term outlook is that a combination of demographics and the high costs of homeownership will affect the apartment sector.

He said that, 15 years ago, the monthly payment on a median-priced home was comparable to the average rent. But not anymore.

“Today, the monthly payment on a median-priced home is more than $1,100 greater than the average rent, and only about 31% of U.S. households have sufficient income to qualify for a loan on a median-priced home,” Chang said.

Additionally, there are 78 million people in the United States in the prime renting age of 24 to 40 years old. Chang said that, in five years, that number will remain the same. Additionally, the number of young adults living with their families is at an all-time high.

Chang said that when the short-term headwinds subside, long-term drivers of apartment demand will come into play, improving apartment absorption. That, along with declining construction, represents “a recipe for falling vacancy and strengthening rent growth,” he said.