Supply chain problems and high interest rates are contributing to a shaky first half for the multifamily sector, according to the National Association of Home Builders (NAHB).

Other challenges include the cost and availability of labor and developed lots, as well as higher material prices.
           
But late 2025 is expected to see the beginnings of a return to normality, NAHB predicts. Some one million units are still under construction – the highest rate since 1973. However, overbuilding has already started to slow. New starts fell 25% in 2024 and are expected to drop by another 11% this year from 355,000 to 317,000. Next year should see 336,000 units.
           
Still, a recent NAHB survey of its members revealed considerable uncertainty about the future. The 4Q 2024 survey returned a score of 48 on its Multifamily Production Index (MPI). Scores for all segments of the market were higher than in 3Q 2024. But the fact that the overall MPI score remained below the breakeven point of 50 -- which would tip the scales in favor of resuming construction -- indicated that builders continue to view the outlook with uncertainty.
           
In contrast, the NAHB’s Multifamily Occupancy Index (MOI) climbed to 81, up four points year-over-year, indicating that existing owners are positive about occupancy.
           
The nation’s currently low unemployment rate gives hope that many young adults aged 25 to 34 now living with their parents will move out and establish their own households, according to Molly Boesel, senior principal economist at CoreLogic.

Speaking at the NAHB International Builders’ Show in Las Vegas, she said many of these young adults will elect to become renters because so few single-family homes are available and homeowners with mortgage rates below 5% are choosing to remain in place.
           
Boesel noted that multifamily rents fell 1% at the end of 2024, but the slowing of new construction could lower vacancy rates and encourage rents to rise.