Decoding Freddie Mac’s 2025 Multifamily Outlook: What Investors Need to Know Now

Freddie Mac’s recently released 2025 Multifamily Market Outlook offers a grounded, data-rich look at where the multifamily sector stands—and where it’s likely headed. The report presents a balanced view of resilience amid volatility, highlighting how the sector has managed to hold relatively steady despite macroeconomic headwinds and a historic wave of new supply.

Key Takeaways from Freddie Mac's Outlook

According to the report, 2024 closed with the highest level of new multifamily supply since the 1980s. Yet despite this influx, strong demand helped prevent major disruptions. Vacancy rates remained fairly consistent, and although rent growth was modest, it remained positive—a testament to the sector’s underlying strength.

Looking forward, Freddie Mac projects positive but below-average rent growth in 2025, alongside a continued, gradual rise in vacancies. Specifically:

Rent growth is expected to come in at 2.2%, falling short of the long-term average of 2.8% (2000–2023, per RealPage).
Vacancy rates are forecasted to increase slightly, reaching 6.2%.
Cap rates have stabilized, but interest rate volatility continues to challenge valuations and deal structures.

Performance will be highly market-dependent. Metro areas with lower levels of new supply and slower post-pandemic rent acceleration are expected to outperform. Conversely, markets with an oversupply—especially in the Sun Belt and Mountain West—could see weaker near-term results despite strong demand fundamentals.

Risks on the Horizon

Freddie Mac assumes a soft landing scenario for the economy in 2025. However, if macroeconomic conditions deteriorate more quickly than anticipated, the combination of high supply and declining demand could put substantial pressure on both rents and occupancy. In such a scenario, investors should expect a significant spike in vacancies and rent compression.

Transaction Volume and Originations: A Gradual Recovery

Originations slowed in 2023 and remained muted into 2024, a reflection of the capital markets environment—rising interest rates, pricing uncertainty, and elevated cap rates all conspired to stall deal flow. Freddie Mac expects a modest rebound in 2025, with projected multifamily origination volume between $370 billion and $380 billion. This uptick will likely be driven by:

A backlog of deals delayed by market conditions.
Maturing loans requiring refinancing.
Continued stabilization of pricing and cap rates.

Longer-Term Perspective

Freddie Mac underscores that the current supply surge is a short-term factor. By 2026, new construction levels are projected to return to pre-pandemic norms. Meanwhile, long-term fundamentals remain supportive:

Chronic housing shortages,
Elevated homeownership costs, and
Demographic trends favoring rental housing are all contributing to sustained demand
for multifamily rentals.

Final Thoughts

Freddie Mac’s 2025 outlook paints a picture of a market in transition—not turmoil. While short-term headwinds exist, particularly around supply absorption and capital market constraints, the sector’s long-term fundamentals remain intact. For investors, developers, and lenders alike, this outlook reinforces the need for a measured, market-by-market approach, with an eye toward quality assets and prudent leverage in the year ahead.

📘 To explore the full report and dive deeper into Freddie Mac’s recent data and projections, you can access it here: 👉 2025 Multifamily Market Outlook – Freddie Mac (PDF)