Multifamily Recovery Gains Steam as Rates Fall and Supply Stabilizes

Key Points

• Multifamily prices bounced back in mid-2025 after a 19% drop from 2022–2024

• Construction has slowed, easing oversupply pressures

• New federal tax incentives are giving deals a boost

Multifamily Momentum Builds

After a two-year reset, the multifamily market is showing real signs of recovery, according to Arbor Realty Trust’s Special Report Fall 2025. Rent growth is back, pricing is up, and the supply-demand balance is stabilizing. Combined with falling interest rates and new federal tax breaks, the sector is gaining momentum heading into 2026.

Economic Picture: Mixed but Manageable

The broader economy is giving off mixed signals. GDP growth remains solid, but the labor market is slowing and consumer spending is soft. Tariff uncertainty is also clouding the outlook.

Still, the multifamily sector is holding strong. Property values started rising again in June — the first gain in over two years — signaling growing investor confidence.

Supply Is Easing, Rents Are Rising

Following a period of skyrocketing growth, the construction boom is tapering. Completions fell from 2.0 to 1.1 units per 1,000 people — much closer to historical norms. That’s helped reduce the oversupply that weighed on prices last year.

Absorption has picked up, with 70% of U.S. markets seeing monthly rent growth this summer. Valuations are back in positive territory.

Financing Conditions Are Improving

Lenders are loosening up. Banks are pulling back on tight standards, and capital is becoming more available.

The Fed has begun to lower interest rates, and more cuts are expected in late 2025 and into 2026. That’s reducing borrowing costs and making deals pencil again.

Tax Policy Is Fueling More Deals

New federal legislation is helping drive investment tailwinds:

• 100% bonus depreciation was restored

• Opportunity Zones are now permanent

• The 9% Low-Income Housing Tax Credit was expanded

These changes improve after-tax returns and make more projects viable.

Outlook: Better Opportunities, More Deals

With supply and capital markets stabilizing, expect more multifamily transactions in the coming months. Investors are seeing clearer pricing, steadier financing, and new incentives to close deals.

Not every market will recover equally — but strong locations with solid fundamentals are already leading the way.

Bottom Line

Multifamily real estate is turning the corner. With interest rates falling, supply rebalancing, and new tax breaks in place, the sector is primed for a new wave of investment.