The volume of multifamily loans is expected to rise in 2025. But rents are expected to head south, with vacancy rates ticking above their long-term averages, according to Freddie Mac’s new multifamily outlook for the year ahead.

The year 2024 saw market fundamentals muted by record high supply, while property values experienced downward pressure because of “elevated and volatile interest rates,” the report stated. Nevertheless, it predicted that, despite short-term pressures, multifamily would remain “a favored asset class over the long term due to continued economic strength, demographic tailwinds and the lack of alternative housing options.”

According to Sara Hoffmann, senior director of Multifamily Research at Freddie Mac, supply is still the major factor impacting the multifamily market, but it is a short-term factor. She predicted that by 2026 it may abate to levels like those before the pandemic.