Multifamily Market Madness: Who Flinches First?

Should be a fun 12 months!

Jan 19, 2025

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Let’s Talk Multifamily Markets

For my inaugural post, I’m here to lay it all out: what I’ll be covering, what you can expect as a subscriber, and where the multifamily market stands as we head into a new week—and a new federal administration. Spoiler alert: the numbers are hot, and the market is cold.

Quick Bio: Why Listen to Me?

I’m on the acquisitions team at a national, vertically integrated multifamily owner-operator managing $4B in assets, with $900M in deals closed last year. I’m in the trenches daily, living the market, so you don’t have to.

Let’s get into it.

Multifamily Market Snapshot: A Game of Chicken

The market is slow.

Buyers want positive leverage against their interest rates. In other words: buyers want more yield on their investment, and interest rates are keeping that from happening.
Sellers are holding firm unless their name (or their borrower’s name) rhymes with "Rides Requities."
Fixed rates are sticking in the high 5% range, with the forward SOFR curve expected to settle around 4%. Hard to tell where those rates are going to go this year given recent inflationary data.

It’s a standstill—who flinches first? My money’s on buyers, sitting on mountains of dry powder and burning fees with no deal flow to show for it.

From CBRE’s January Economic Debrief: What You Need to Know

The broader economy is throwing us some curveballs:

Equities are bouncing back. The S&P 500 erased its 2025 losses yesterday with a nearly 2% surge—the biggest since November.
Shelter costs slowed. Rent rose +0.31% in December, but the pace is much tamer than we’ve seen in years.
Inflation cooled. U.S. CPI rose less than expected, fueling optimism for Fed rate cuts. Core CPI came in at +3.2% YoY and +0.2% MoM, below forecasts.
Low DUS supply is keeping spreads tight. Only $100M of new DUS issuance hit the market, and muted supply is expected to persist. Tight spreads make further compression tough, but significant widening also seems unlikely.
Rates may shift, but not yet. The implied Fed rate for the end of 2025 is 3.97%, with markets pricing in at least one 25-bps rate cut. Swap contracts show just a 3% chance of a rate change at the January meeting.

Linneman’s Crystal Ball

Economist Peter Linneman predicted on Willy Walker’s webcast that the Fed could compress rates by 100 bps and cap rates might tighten from 5.7% to 5% within 12–18 months. He was right last year, so fingers crossed for a repeat performance.

Treasuries & Rates

Treasury yields have eased, sparking some relief:

The 10-year yield dipped by 19.8 bps to 4.609%.
The 5-year yield followed, dropping 19.6 bps to 4.41%.
SOFR’s 30-day average is down to 4.31%, easing
7 bps week over week.

Looking Ahead

Where does this leave us? A market stuck in limbo. Exit cap rates and market rent growth buttons will get overworked in underwriting models this year, while transaction volume crawls toward historic norms.

What do you think? Are buyers or sellers the first to blink? How many rate cuts are we looking at in 2025? Drop your thoughts—because in this market, everyone’s a fortune-teller.

Market Digest: Multifamily Real Estate Updates

The Midwest City Is Top Rental Market to Watch
Minneapolis ranks as 2025’s top rental market based on RentCafe activity, with a 36% rise in page views and 8% growth in saved searches. Atlanta and Overland Park also noted as high performers.
Apartment Occupancy Improves in Most Markets
Occupancy rose by 30–100 bps in half of the top 50 metros in 2024, with Las Vegas leading at 200 bps.
2025 Starts as a Renter's Market
Median U.S. asking rents fell to $1,594 in 2024, down 0.3% YoY and 6.2% from the August 2022 peak, driven by higher vacancies (8%) and increased supply. Austin, TX saw the steepest decline, while Providence, RI led rent increases.
Insurer Cites "Growing Catastrophe Exposure" As It Stops New Sales in California
State Farm has halted new homeowner insurance applications in California due to wildfire risks and rising costs, echoing moves by other insurers as climate-related disasters escalate, widening the gap between cost to rent and cost to own.
HUD Awards $100M to Cut Red Tape for Affordable Housing Production
HUD is distributing $100M in grants to 18 recipients to tackle affordable housing barriers by revising zoning laws, updating housing plans, and expediting permits amid a 1.5–2M unit housing shortage.