One year after multifamily investor sentiment took a sharp dive, it has reversed course and now reflects improved fundamentals and a growing optimism about the sector’s near-term performance, according to a first-quarter report from Altus Group.
The report said elevated mortgage rates and constrained for-sale housing inventory continue to redirect people toward rentals, which is reinforcing occupancy and rent stability. As new supply decelerates, the rental market is benefiting from a rebalancing in housing dynamics, said Altus.
Early last year, survey respondents who viewed the multifamily sector as a likely top-performing asset class fell from nearly two-thirds to less than half, and those who saw multifamily as a potential worst performer rose to nearly one-third, said Altus. This swing marked one of the largest quarterly sentiment shifts in the survey’s history, with investors noting concerns about rising operating and insurance costs, mounting distress in the CRE collateralized loan obligation (CLO) markets and an expected surge of new supply likely to put pressure on rents.
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“Fast forward to Q1 2025, and the mood has shifted dramatically,” said Altus. “Sentiment has rebounded, with 62% of respondents now identifying multifamily as a potential top performer (up sharply from the 46% figure a year prior) while just 6% now consider it a likely worst performer,” said the report. “This 40-point swing signals a complete reversal in respondent outlook.”
The single-family housing market is constrained by a mortgage rate “lock-in” effect, which discourages sellers from moving properties that were financed at much lower rates than are available today. According to the National Association of Realtors, there were just 4.02 million existing home sales in March 2025 on a seasonally adjusted annual basis, fewer than during the Global Financial Crisis and the lowest in over 30 years, said Altus. Some demand shifted toward new construction, but with persistent elevated mortgage rates and rising construction costs, building is leveling off, as noted by Altus.
Meanwhile, rising home costs have been driven by surging demand for space during the pandemic, a wave of Millennials entering their home-buying years and chronic undersupply in key markets, the report noted.
Particularly, the high-rise and mid-rise apartment segments are seeing accelerating rent growth, and despite pockets of localized declines, particularly in overbuilt Sun Belt metros, the broader multifamily market is on firmer footing. Supporting this renewed optimism, multifamily was one of only two sectors to record year-over-year growth in transaction volume, according to Altus Group.
“As turnover in the existing home market remains limited and new single-family development becomes more difficult to deliver, fundamentals continue to favor multifamily,” Altus wrote, “Despite economic uncertainty, overall housing demand remains strong, supported by a stable labor market and resilient consumer spending.”
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
