The nation’s multifamily market is entering a more restrained phase—marked by rising vacancies, moderating rents, and tighter development conditions, noted economists speaking at the National Association of Home Builders (NAHB) International Builders’ Show in Orlando, Florida.
Many households are choosing to remain in the rental market due to home affordability challenges. The recent influx of supply has pushed multifamily rents down 1% year over year, while single-family rent growth also has slowed. Rents remain strong in supply-constrained markets in the Midwest and Northeast, such as Chicago, New York, and Philadelphia. However, they have weakened in the high-supply Sun Belt metros of Las Vegas, Phoenix, and Tampa, Florida.
“The national multifamily vacancy rate ran up to a record high 7.3% in December,” said Molly Boesel, senior principal economist at Cotality. “We’re past the peak of a multifamily construction surge, but a healthy supply of new units is still hitting the market and colliding with sluggish demand, causing vacancies to continue trending up.”
Multifamily starts are anticipated to fall 5% this year to an annual pace of 392,000 units. An additional 6% decrease is anticipated for 2027 to a 367,000 rate, coming in at near pre-pandemic levels.
“The multifamily market has slowed due to tighter financing and elevated construction costs and is moving toward a more constrained development environment,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “However, despite the pullback in starts, multifamily completions reached a 38-year high in 2024 with 608,000 units as projects initiated during the boom years were delivered to market.”
Nanayakkara-Skillington broke down some key points about recent multifamily production, with the composition shifting toward larger properties—54% of completions in 2024 comprised buildings with 50 or more units, the highest share in decades. The “missing-middle” construction sector, which is smaller-density housing with two to four units such as townhouses and duplexes, has been sluggish since the Great Recession, totaling 4,000 starts in the third quarter of 2025, representing 3% of multifamily production.
Multifamily property values decreased 4% year over year in 2025 and are roughly 28% below 2022’s high. However, values are 8% above 2019’s pre-pandemic levels.
Property sales also rebounded last year, increasing 15%. Eighty percent of metros saw an increase in sales compared with only 20% in 2024.
“The regional sales shifts were notable, as we saw particularly strong growth in Midwest and California metros,” said Boesel. “Meanwhile, some Sun Belt markets that surged in 2024 posted declines in 2025.”
The multifamily market also is still seeing an increase in delinquency rates; however, these are much lower than the office sector.
“Delinquency rates are rising due to higher interest rates, changes in property market fundamentals, and uncertainty about property valuation,” added Boesel.