Multifamily Market Analysis Made Easy(ish)
Easy-ish?
Happy 2025 Bright Build readers!
As promised, The Bright Build team will dive head-first into a little light market analysis/news at least once a month and unpack what it means for multifamily developers.
In other words, I’ll sit here with a cup of coffee and stare blindly at a bunch of charts, so you don’t have to :-)
For example, did you catch up on Gray Capital’s 2025 multifamily forecast?
Of course, you didn’t.
I read it for you.
Okay, so here's the big picture: the economy is cooling off a bit, but don't worry – employment and GDP are still looking better than they were before the pandemic. Good news on the inflation front, too – it's trending down. With wages outpacing inflation, more people are looking to rent, which is great for our industry. As the report notes, the incoming Trump administration could mean less red tape and lower taxes for commercial real estate, BUT his stance on tariffs and immigration might shake things up a bit.
The housing market? Still going strong in 2025.
Buying a home is pretty expensive compared to renting right now, which means the rental market is solid. We're seeing the apartment supply wave starting to calm down, but it's not the same story everywhere. Some markets are still building like crazy, while others can't keep up. The Midwest is actually looking pretty good for rent growth. Speaking of growth, check this out: Jacksonville is looking at a nice 3.3% bump in rents, while Orlando's barely moving at 0.3%. Ouch.
Investors are getting excited again, and it's not hard to see why.
The market's starting to stabilize, interest rates aren’t expected to rise further, and apartment supply is returning to normal. Even better, Agency and FHA lenders are loosening their purse strings. While we might not see cap rates drop if interest rates stay high, 2025 could be pretty active with all the loans coming due. Banks are in better shape with their commercial real estate holdings these days, and the New York Fed is suggesting that extending loans might not be the way to go anymore – which could mean more opportunities to snap up properties.
The numbers back this up, too. The NMHC's equity financing index hit 63 – the highest we've seen since January 2022. Their debt financing index is sitting pretty at 77, and the ULI Firm Profitability Prospects index jumped up 24% from last year.
Here's something to watch: all those loans coming due in 2025 could REALLY shake things up. Why? Because some owners will likely be forced to sell rather than refinance, given current interest rates and cap rates.
So, what's the bottom line for developers?
Watch Your Markets: Not all markets are created equal. Some are getting packed while others are starting to need new development. Do your homework on supply, demand, and rent growth in different areas. Know your market. Know your submarket. And….know your dreamland.
Keep an Eye on Those 2025 Loan Maturities: There might be some good acquisition deals coming up as loans come due, but remember those interest rates are still up there.
Make a Move: With demand staying strong, it might be time to make your move – whether that's building new developments or picking up existing properties.
Peace,
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