The U.S multifamily sector continues to benefit as renting remains a significantly more cost-effective alternative to homeownership. The third quarter showed signs of cooling absorption following an unprecedented surge in demand. While overall leasing activity has moderated, the Sunbelt continues to outperform other regions, with demand remaining strong relative to existing inventory. However, rent growth turned negative on a year-over-year basis, partly due to competition for renters in high-supply markets. Market selection has become increasingly critical, as the gap between high-performing markets and those with lagging rent growth continues to widen.
On the capital markets side, multifamily debt originations accelerated year-over-year, reflecting renewed confidence and improving liquidity conditions. Sales volume also gained momentum as investors seek opportunities. Recent investment trends show a clear preference for newer, higher-quality assets, particularly in the Sunbelt, where demographic and employment growth continue to drive the region’s long-term appeal. Meanwhile, the Midwest is quietly gaining investor attention, benefiting from more stable fundamentals and attractive relative pricing.
Key Takeaways:
- Net absorption reached 42,000 units in 3Q25, signaling normalization after record demand in recent quarters.
- Annual demand as a share of inventory held at 3.2%, nearly triple the long-term average.
- Multifamily debt originations rose 48% year-over-year, the strongest pace since 2021.
- Sales volume climbed to $43.8 billion, up 12.6% from a year earlier.
- Rent growth declined 0.1% year-over-year, while Class A assets posted modest gains.
- Pipeline contraction deepened, with units under construction down more than 50% since 2023.
