Multifamily printed a steady Q2 read: rents inched higher, expenses cooled, and demand absorbed more than 300,000 units in the first half of 2025. Occupancy held firm at ~95%, creating cleaner underwriting inputs after two years of volatility.
📌 Key Highlights
National average asking rent: $1,754 in July (+$2 MoM; +0.7% YoY).
Occupancy: 94.7% (flat for 4 straight months).
H1 absorption: 300,000+ units, despite heavy new supply.
Expense growth: +1.3% (market-rate), +1.7% (affordable) in H1 — sharply below prior peaks (+8%+).
Insurance: still >120% higher than 2019, a structural cost step-up.
Leading markets YoY rent growth: Chicago +4.1%, Columbus +3.9%, Detroit +3.5%, New Jersey +2.7%.
Laggards: Austin −4.6%, Denver −3.9%, Phoenix −2.8%, Las Vegas −1.7%.
Build-to-rent (BTR): national asking rent $2,205; occupancy 95.0%.
1. Comps & Pricing Dynamics
The July data shows a reset to stability. After multiple quarters of supply-driven rent softening, national averages are back to slow, positive growth. Importantly, pricing bifurcates by region: Midwest/coastal nodes lead, Sun Belt laggards struggle.
2. Liquidity & Transaction Flow
While multifamily remains one of the most liquid asset classes, deal underwriting is shifting. Buyers are cautious in Austin, Denver, and Phoenix, where oversupply is compressing rents, but are warming to Midwest metros where absorption has outpaced new supply. This divergence sets the tone for deal flow into Q4.
3. Sector Divergence
The Midwest’s resurgence is critical: historically overlooked, markets like Chicago and Columbus are now leaders. Meanwhile, BTR shows durability (95% occupancy), but pricing premiums must be justified by local demand depth — not national averages.
4. Execution Implications
For operators, the underwriting pivot is expense control. Insurance inflation remains a structural burden, even as utilities, repairs, and staffing pressures ease. Stabilized occupancy at 94–95% is now the baseline assumption, not the ceiling. Lease-up timelines in supply-heavy nodes will remain extended through 2026.
🛠️ Operator Take
This isn’t a rent-growth play right now. It’s a stability and expense-control play. I’m modeling 0–1% near-term rent growth in supply-heavy metros, keeping insurance elevated in the budget, and underwriting stabilized occupancy at 94–95%. In Midwest winners, I’ll lean a bit higher, but I won’t pay for growth that isn’t proven.
📈 Read-Through
The story here is underwriting clarity. Multifamily buyers now have cleaner comps to work with: rents inching up, occupancy stable, expenses cooling but insurance sticky. Investors should treat this as an opportunity to lock in basis in markets with demand resilience, while avoiding overpaying in metros still digesting supply.
Lease-up pressure: Heavy pipelines in Austin, Denver, Phoenix keep concessions elevated through 2026.
Insurance: Remains structurally higher — don’t underwrite it back to pre-2019 levels.
Demand: 300K+ absorbed in H1 confirms depth, but absorption must continue through the second delivery wave.
BTR: Expect ongoing investor interest, but watch for saturation in amenity-heavy communities.
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