Market Forecast Mid-Year 2025
Multifamily
Outlook
Steady Fundamentals Amid Shifting Growth Trends
The Western U.S. multifamily market has demonstrated resilient performance over the past decade, characterized by low vacancy rates, expanding inventories, and steadily rising lease rates. Investment activity has generally remained consistent since 2013, with sales volume peaking in 2021 and 2022 before falling in 2023. However, a rebound is now underway, with transaction volume gaining momentum in both near and long-term projections.
Although rents continue to climb, the pace of growth has slowed significantly compared to the post-pandemic surge and have relatively flat during the first half of the year. From 2021 to 2022, average rents rose by a combined 21.4%. In contrast, rent growth in 2023 and 2024 totaled just 1.9%, reflecting a broader market recalibration.
High Mortgage Rates Sustain Renter Demand
Despite slowing rent growth, demand drivers remain intact—and are expected to support the sector into 2026. Chief among them is diminished buying power and the high cost of homeownership, which continue to keep prospective buyers in rental housing longer.
Elevated 30-year mortgage rates, peaking at 7.8% in October 2023 and hovering in the low 6% range throughout the first half of 2025, have kept homeownership increasingly out of reach for a large share of the population. As a result, the average mortgage payment is now 35% higher than the average multifamily rent in the U.S.
Mortgage Payments Vs Multifamily Rent
Transaction Volume Rebounds Following 2023 Downturn
Western U.S. apartment sales experienced a sharp downturn in 2023, plunging 60% year-over-year to just $5.5 billion. Average unit pricing also declined, falling from $275,000 in 2022 to $267,000 in 2023, an 11% reduction. This decline was driven by a mix of challenges, including significant interest rate hikes, volatility in the financial markets, and a widening price gap expectations between buyers and sellers.
Yet the market showed impressive resilience. Multifamily sales began a notable recovery in 2024 and continued to gain solid momentum during the first half of 2025. Over the past 12 months, transaction volume grew to $15.2 billion, and the average unit pricing rose to more than $272,000, approaching 2022 levels and signaling a revitalized market.
Multifamily Sales Volume Beginning to Rebound
Vacancy Trends Vary Across Markets
Overall supply and demand remain relatively balanced across most Western U.S. markets. Since the end of 2019, the regional multifamily vacancy rate has risen by 100 basis points, from 5.4% to 6.4% as of Q2 2025. The rate is expected to increase modestly to 6.7% by year-end.
Market-level differences persist, with Phoenix standing out for having both the highest vacancy rate and the largest post-covid increase. This spike is largely attributed to a surge in new construction, with over 25,000 units added over the past two years—representing 20% of the Western U.S. total completions.
By contrast, markets such as Orange County, San Diego, and Silicon Valley have bucked the trend, registering a decline in vacancy rates since 2019—an indicator of enduring demand in these areas.
Multifamily Vacancy Rates By Market
Western U.S. Multifamily 3-Year Forecast
ContactGARY BARAGONA |
Share This Post |
Stay in the know and subscribe to our monthly West Coast Market Trends report and our quarterly market research.