Rethinking Multifamily Real Estate Trends in a Post-Zero Interest Rate Policy (ZIRP) World
The easy-money days are over. The multifamily outlook 2025 has changed.
Since interest rates began rising in 2022, multifamily real estate trends have been reshaped. Valuations have reset. Cap rates have expanded. And investors who chased short-term yield in boom-and-bust traders markets like Phoenix and Austin are now feeling the burn.
**Source: https://www.cnbc.com/quotes/US10Y **
In 2025, the winners won’t be those who try to “time the market” as traders in Phoenix — but those who deploy capital with discipline in the right markets with conservative long term financing.
In this post, we dive into three key pillars: apartment industry trends, recognizing misalignments, and adopting the proper multifamily outlook 2025. Designed to help investors navigate the current environment and avoid the pitfalls that are tripping up others.
Apartment Industry Trends – Why the Midwest is a Good Strategy in 2025
At first glance, the Midwest isn’t flashy for multifamily real estate. However, in a higher-for-longer rates, this region delivers real, risk-adjusted growth without relyiance on cap rate compression.
In addition, the Midwest is countercyclical. Midwest metros shine during uncertainty. After the Great Financial Crisis, while places like San Francisco and Boston faced deep corrections in multifamily rents and valuations, cities like Columbus and Cincinnati delivered consistent cash flow and limited downside.
This dynamic is reemerging.
Big players are taking notice. Recently, Morgan Properties acquired a 11 property portfolio totaling 3,054 units in eight Midwestern states valued at $501M.
According to the Yardi Matrix Multifamily National Report – February 2025, Columbus posted 3.8% YoY rent growth, alongside a +0.5% month-over-month gain. Kansas City (+4.1%), Chicago (+3.6%), and Indianapolis (+3.2%) followed closely—all outperforming the national average.
Meanwhile, as Yardi notes, metros like Austin and Denver posted YoY rent declines of -5.1% and -3.1%, respectively, due to oversupply from rapid construction pipelines.
Midwest markets aren’t just performing—they’re absorbing new inventory at a steady clip due to a constraint from limited supply.
CBRE’s 2025 Multifamily Outlook also supports this trend:
“Investors will have to wait until 2026 or later for market fundamentals in the Sun Belt and Mountain regions to be as strong as those of the Midwest, Northeast and coastal regions.”
The good news?
The Midwest is set to outperform national multifamily averages in 2025, with vacancy expected to hold at 4.9% and annual rent growth reaching 2.6%. Nationally, developers plan to deliver more multifamily units than in any period since the 1970s—a time-machine moment for many of us.
Where are developers building?
Great question. However, logic doesn’t appear to be present for this answer. Developers are directing the majority of new supply to already saturated regions like the Sun Belt and Mountain markets, where inventories could rise by 20% over the next three years. Despite supply challenges, headlines continue to spotlight these regions, and herd-driven investors keep betting on improved vacancy and rental growth in the years ahead.
That won’t be us.
With lower supply pipelines, strong rental demand, and rising occupancy, we’re staying right where we’ve been since 2006.
Institutional capital is taking notice of these apartment industry trends. There’s a clear pivot toward what some are now calling “durable growth markets”—metros like Cincinnati that may not have the same sizzle but deliver when it counts.
Misalignment and Capital Constraints Reversing
Borrowing costs are double what they were two years ago, and buyers won’t chase yesterday’s valuations because they would sacrifice returns. Meanwhile, sellers are tied to their 2021-2022 ZIRP era basis. The result has been a dramatic drop in transaction volume.
This misalignment between buyers and sellers on price expectations will still create challenges in 2025, but this misalignment is reversing a price discovery takes hold. Sellers are increasingly realizing that their pre-2022 ZIRP era mindset is a relic of a bygone era, bid-ask spreads are narrowing, and transaction volume is picking up.
Capital is still cautious.
According to Freddie Mac’s 2025 Multifamily Outlook, multifamily originations are expected to increase in 2025 – yet remain below the peaks seen in 2021 and 2022. The increase in originations will be driven by backlog of multifamily transactions that have been sidelined due to high interest rates, loan maturities, and continued stabilization of property pricing and cap rates.
The lesson? Those operators who locked in long-term fixed-rate debt, avoided frothy underwriting, and stayed close to the fundamentals are not just—they’re acquiring.
Because capital isn’t gone—it’s just more cautious. And in today’s climate, conservative investors look smart relative to the go-go syndicators who bought thousands of units with 3-year floating rate bridge debt.
PRPI’s advantage? Our discipline was built for this. By structuring deals around in-place cash flow and utilizing long-term fixed rate debt, we remain insulated from short term turmoil while others need to recalculate.
Explore how we structure deals to prioritize long-term performance
The Multifamily Outlook 2025 – Making Sense of the Madness
Execution is the separator in 2025. And discipline—not optimism—is what carries the day.
We’ve seen this movie before. Many sponsors banked on cap rate compression and short-term rent spikes. That worked—until it didn’t. Floating-rate debt? Once a hedge, now a hazard.
According to the Mortgage Bankers Association, total commercial and multifamily mortgage debt increased 3.7% YoY in Q4 2024, with multifamily debt growing faster than the overall market increasing 5.4% YoY– investor confidence is improving. Almost 50% of this debt is held by Agency, GSE Portfolio and MBS, with Life Insurance companies taking on the most debt YoY, growing 12.5% in Q4 2024.
What does this tell us?
The CRE lending environment is improving, with multifamily leading the way. Investor confidence is on the rise and institutional capital is taking more positions, expanding its footprint into the apartments space.
In other words, capital hasn’t disappeared—it’s just being more selective. Lenders are prioritizing operators who can show consistent cash flow, maintain occupancy, and present a path to durable value creation.
We agree with CBRE, Yardi and MBA – we like the Midwest as our Multifamily Outlook 2025.
And we’re ready.
We underwrite deals based on what we know—not what we hope for. That means:
- Stress-testing every asset for rate sensitivity and downside protection.
- Prioritizing cash flow over speculation, especially in the early years of hold.
- Securing long-term, fixed-rate financing with modest leverage to ensure sustainability.
- Targeting markets with demonstrable stability—not just buzz.
It’s not about outperforming in bull markets—it’s about never getting caught without a seat when the music stops.
Our stance?
While others are pulling back or restructuring failed deals, we’re able to deploy capital confidently—selectively acquiring assets at meaningful discounts, with fundamentals on our side.
Why The Multifamily Outlook 2025 Rewards the Patient and Prepared
Real estate always cycles What was hot is suddenly not hot.
Capital is retreating from overbuilt markets. Valuations are correcting. Loose strategies are being exposed. But through the volatility, a quieter lesson is emerging: long-term capital is that positions for performance rather than hype is the turtle that wins the race.
Operators like Piping Rock who are already positioned with the right markets, using conservative underwriting techniques and long term fixed rate debt need to wait for “normal” to return. They’re operating effectively now.
Our multifamily outlook isn’t about weathering 2025. It’s about setting the foundation for the next decade. See our strategy in action — read the Chimney Hill case study