Multifamily Market Trends: A Promising Start to 2025 for Passive Investors

As we step into 2025, passive multifamily investors have reason to be optimistic. According to the latest Yardi Matrix Multifamily National Report, January marked the end of a six-month decline in rents, offering a positive signal for the industry. While challenges remain, the report highlights key trends that can help investors navigate the market strategically.

Rents Show Signs of Growth

After months of negative rent growth, the national average asking rent ticked up by $3 in January, reaching $1,746. The slight increase may seem modest, but it marks a reversal in the trend, signaling potential stability ahead. Markets leading this growth include metros in the Northeast (New York City, New Jersey, Philadelphia) and Midwest (Detroit, Kansas City, Chicago), reinforcing the value of diversification across geographies.

Demand Drivers Remain Strong

A key question for investors is whether demand will match the record levels seen in 2024, which saw 400,000 units absorbed, one of the highest on record. Several indicators suggest sustained demand:

• Job Growth:?The economy continues to add jobs, with 256,000 new jobs in December alone.
• Household Formation:?More young adults are moving out of their parents’ homes, reversing pandemic-era trends.
• High Mortgage Rates:?With homeownership increasingly out of reach, apartment retention rates are at record highs.

For passive investors, these factors point to the continued appeal of multifamily investments, particularly in markets with stable employment and population growth.

Supply and Occupancy Trends

Despite strong demand, the influx of new apartment deliveries has impacted occupancy rates, which declined to 94.5% in December, the lowest since early 2014. Some high-growth markets, including Austin, Raleigh-Durham, Charlotte, Nashville, Denver, and Phoenix, are seeing both negative rent growth and declining occupancy?despite high demand. This signals potential challenges in oversupplied markets but also opportunities for savvy investors to identify value-add plays.

Key Takeaways for Passive Investors

1. Geographic Diversification Matters?– Northeast and Midwest markets are currently performing well, while some Sun Belt cities face supply headwinds.
2. Stay Focused on Demand Fundamentals?– Job growth and household formation trends remain favorable for multifamily investing.
3. Monitor Supply Pipelines?– Oversupply in certain markets may impact near-term cash flow but could present long-term acquisition opportunities at discounted valuations.

Final Thoughts

The start of 2025 provides encouraging signs for multifamily investors, particularly those focused on stable, well-located assets. While rising supply poses challenges in some areas, the demand fundamentals remain strong. Passive investors who stay informed and strategically allocate capital can continue to find solid opportunities in the multifamily sector.

P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to download my new eBook: The Ultimate Guide to Creating & Preserving Your Wealth.

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About Ellie Perlman

Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.

A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.

Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.

She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.

Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.

You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.

*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.