November 16th, 2025
Newmark released its "3Q25 U.S. Multifamily Capital Markets Conditions & Trends" report on Friday.
Below is an overview of the reports findings.
Overall Market Direction
The U.S. multifamily sector in Q3 2025 shows a market that is stabilizing after several years of unusual volatility. Fundamentals remain generally healthy—demand is positive, capital is flowing back into the sector, construction pipelines are shrinking, and investor sentiment is improving. At the same time, rent growth and vacancy trends are diverging across markets, reinforcing the importance of market selection.
🏡 Demand, Renters, & Housing Affordability
Renting remains dramatically cheaper than owning.
The cost gap between monthly mortgage payments and rent has widened to the highest multiple in decades, keeping many would-be buyers in the renter pool.
Mortgage rates have eased slightly, but the gulf between existing low-rate mortgages and today’s rates still discourages owners from selling, limiting mobility.
Mortgage application activity is up modestly from last year but remains far below the pandemic boom.
Home prices continue to rise, though at a slower pace, keeping affordability strained and supporting sustained rental housing demand.
🏢 Leasing & Operating Fundamentals
Demand cooled to normal long-term levels after several exceptional years, but the trailing 12-month absorption is still historically strong.
Seasonality patterns have flattened: leasing activity is now more evenly distributed across the year, unlike pre-2020 norms.
The South continues to dominate national demand share, while the Midwest and Northeast gained modest traction.
Supply deliveries remain high but are now past their peak. The incoming pipeline for 2026–2027 has thinned substantially due to sharply lower starts.
Vacancy rates increased in Q3, but nearly all major markets still posted year-over-year vacancy improvements.
Rent growth dipped slightly into negative territory as competition intensified in high-supply Sunbelt markets.
Rent performance varies significantly: supply-constrained coastal and Midwestern markets are driving positive growth, while most Sunbelt markets are flat or negative.
Renewal pricing is outperforming new-lease trade-outs as landlords focus on retention and occupancy stability.
💰 Debt Capital Markets
Multifamily debt originations surged 48% year-over-year, reflecting improved confidence and tighter spreads.
Government-sponsored enterprises (GSEs) remain the largest lenders, though non-bank lenders (debt funds, insurance companies, CMBS/CLO lenders) are rapidly gaining share as banks retrench.
A heavy wave of loan maturities is approaching—nearly $770 billion between 2025 and 2027—with banks and debt funds disproportionately exposed in the near term.
Extensions have masked some distress, but underlying pressure is building, particularly for bank, CLO, and debt-fund financed properties.
Roughly a quarter of 2025 maturities appear potentially troubled based on LTV estimates.
📊 Investment Sales
Sales volume rose to $43.8B in Q3, representing double-digit growth year-over-year and strong momentum on a trailing 12-month basis.
Multifamily remains the most heavily traded property type, capturing nearly one-third of all U.S. CRE transaction volume.
Investors continue to rotate toward newer, post-2010 assets to avoid heavy capex and construction risk.
Sunbelt markets still attract the most capital, but the Midwest is gaining market share as investors look for more stable, lower-supply environments.
Dallas remains the nation’s largest multifamily sales market, with major coastal metros also experiencing rapid year-over-year growth.
📈 Pricing, Cap Rates & Returns
Cap rates have been relatively stable: transactional averages remain in the mid-5% range, with core/core-plus valuations slightly tighter.
Multifamily delivered the strongest total returns across major property sectors for the sixth consecutive year.
Markets like San Jose, Houston, and Suburban Maryland are posting the highest returns, with selective strength even in some high-supply regions.
🎯 Key Takeaways
Demand is healthy, but rent growth will remain uneven until supply moderates further.
Construction pipelines are shrinking, setting the stage for tighter conditions and firmer rent growth in 2026–2027.
Debt markets are improving, though the large maturity wall and higher-rate environment will create pockets of stress.
Investment activity is ramping back up, with strong appetite for high-growth markets and newer product.
Market selection matters more than ever due to widening performance dispersion between top and bottom markets.
