Lessors of Residential Buildings NAICS 531110

May 16, 2025 - Multifamily Developer Confidence Drops

• Multifamily developer confidence declined in the first quarter of 2025, according to the National Association of Home Builders’ (NAHB) latest Multifamily Market Survey. The Multifamily Production Index (MPI) fell three points in Q1 2025 to 44 compared to the first quarter of 2024. The Multifamily Occupancy Index (MOI) decreased by one point to 82 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. Multifamily developers’ headwinds include a tight lending environment, higher borrowing costs, and regulatory difficulties. More than half of multifamily builders surveyed said their suppliers had raised prices in response to announced, enacted, or anticipated tariffs. While multifamily construction activity is expected to remain weak for the remainder of the year, the NAHB projects a modest recovery will take hold in 2026.
• US apartment sales increased 7% year-over-year in the first quarter of 2025, reaching $30 billion, according to MSCI Real Assets and reporting by Multifamily Dive. The rise marked the fourth consecutive quarter of increased apartment sales. Single-property sales saw the most significant growth, rising 39% over Q1 2024 to $25.7 billion. While sales of individual apartment assets have returned to pre-pandemic levels, portfolio and entity-level sales remain below historical norms. Portfolio apartment deals increased 18% in the first quarter of 2025 to $4.4 billion, while there were no entity-level deals in Q1. MSCI noted that while US trade policy news cycles have had a whipsawing effect on public equity and bond markets, the multifamily market rarely reacts to shocks in a single quarter.

• The US homeownership rate fell to 65.1% in the first quarter of 2025, marking the lowest level since the first quarter of 2020, according to the US Census Bureau’s Housing Vacancy Survey (HVS). Homeownership has been pressured as housing affordability remains at the lowest point in several decades amid high interest rates and a lack of inventory. Homeownership rates in Q1 were down across all age groups except people over 65. At 36.6%, the homeownership rate for those under 35 was the lowest in six years. A lower homeownership rate represents an opportunity for lessors of residential properties.
• Apartment owners may benefit from the timing of the Trump administration’s tariff regime, according to The Wall Street Journal. In 2023 and 2024, more than 1.1 million new multifamily units came online, the largest apartment boom since the 1980s, according to Yardi Matrix. The resulting oversupply suppressed rent growth, and high interest rates further hindered new development. Landlords expect the flood of apartment supply to be mostly absorbed by the end of 2025 and anticipate annual rent growth of up to 5%. Tariffs are also increasing building materials prices, which could further reduce the appetite for multifamily developments. Tariffs and the resulting economic uncertainty, combined with high interest rates and a lack of affordability in the single-family market, may also keep people renting longer.