Historically, there has been a correlation between consumer sentiment and household formation, which raises the question of how recently slipping consumer sentiment might impact the multifamily market.
Although 2025 started on an optimistic note for the overall economy, investor uncertainty has begun to creep in as the new administration has moved forward with its agenda. Investor opinions are largely being influenced by uncertainty in the bond markets, the weakening U.S. dollar and the evolving trade war, said Marcus & Millichap multifamily division director Peter Standley.
At the same time, the multifamily industry has enjoyed strong fundamentals with four quarters of solid demand. More than 585,000 units were delivered last year and 410,000 are expected to be delivered this year. Absorption was extremely strong in 2024 with a net of 663,000 units, the second-highest calendar year total on record behind only 2021.
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But, the consumer sentiment index has declined to its lowest level since the pandemic, driven by expectations of increasing unemployment, challenging inflation and the threat of tariffs. Many blue-chip economists are predicting an economic slowdown, with many forecasting a potential negative GDP in the second quarter of this year, according to Standley.
In tightening economic conditions, people often opt to remain in their current living situation rather than take the leap into renting a new apartment. Vacancy levels were expected to drop this year, but that is less certain amid the recent increase in uncertainty, he said.
“We still face a lingering housing crisis, which will drive demand long term,” said Standley. “Many markets are still facing elevated in-migration, which will counterbalance the falling consumer sentiment index.”
Dallas/Fort Worth is a prime example, said Standley. The market is expected to deliver 100,000 units from 2023 to 2025 while also attracting 100,000 people to the metro area on an annual basis, which will offset new unit deliveries.
“As we've experienced with this trade war, policy could shift, and the entire landscape could change by tomorrow,” said Standley. “This is the challenge investors face. The long-term outlook remains very strong, and 2025 will be a pivotal year for multifamily investing.”
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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.
