Why Multifamily is an Attractive Investment - A Data-Driven Analysis

The multifamily real estate sector continues to present lucrative opportunities for investors, especially in the context of the ongoing U.S. housing supply shortage. This shortage, coupled with projected supply dynamics and economic trends, underscores the potential for robust returns in multifamily investments.

Recent research from Green Street’s 2025 U.S. Apartment Outlook highlights key economic forces shaping the multifamily market, providing critical insights for investors looking to capitalize on the current landscape

Key Economic Trends Driving Multifamily Demand

1. The U.S. Housing Shortage Continues to Worsen

The U.S. faces a significant housing shortage, with experts estimating 4.9 million units needed to meet demand. This supply-demand imbalance has been driven by decades of underbuilding, restrictive zoning laws, and rising construction costs​.

What This Means for Investors:

• Multifamily properties, especially in high-demand markets, will continue to see strong occupancy rates.

• Limited supply will support rent growth, particularly in coastal and high-density urban areas.

• New construction is slowing due to financing costs, meaning existing multifamily assets are even more valuable​.

  
  

2. Projected Supply Decline & Market Rebound in 2027

The multifamily housing sector is poised for significant supply shifts in the coming years​:

• Peak and Decline in New Units: In 2024, the market is expected to see a peak with nearly 600,000 new multifamily units completed. However, projections indicate a sharp decline of 15.2% in 2025 and a further 53.8% in 2026, leading to a substantial reduction in new supply​.

• Demand Outpacing Supply: Despite the influx of new units in 2024, demand for multifamily housing is anticipated to remain strong. This sustained demand, combined with the projected decrease in new supply, is expected to create favorable conditions for rent growth and property value appreciation by 2027 and beyond​.

  
  

  

  Multifamily Supply declining sharply in 2025 on from 2024 highs due to interest rates and construction costs elevating, not allowing developers to deliver product, further exacerbating the housing shortage

  
  

Why This Matters for Investors:

Investing before the supply crunch allows you to benefit from rising rental demand and value appreciation.

Multifamily property owners will have strong pricing power, driving rent increases.

New supply constraints and elevated home ownership costs will force renters to remain in the rental market longer, benefiting existing multifamily owners​.

3. Homeownership Affordability is at a Multi-Decade Low

The homeownership rate is projected to decline through 2025-2026 as housing affordability worsens​.

• Mortgage rates remain elevated (~7%), making monthly housing payments significantly higher.

• Home prices have surged 50% over the past five years, outpacing wage growth.

• The "lock-in effect"—many homeowners with low mortgage rates are choosing to stay put instead of selling, reducing available inventory​.

Takeaway: More Americans are forced to rent longer, strengthening demand for multifamily housing.

The National Homeownership Rate continues to sit at multi-decade lows

4. Rising Rents & Rent Growth Projections

According to Green Street’s report, apartment rent growth is expected to average 2.4% annually over the next five years, with some markets exceeding this rate​.

Where is rent growth strongest?

• Coastal metros: New York, San Francisco, Seattle, and Boston are expected to outperform in 2025 due to strong job growth and high homeownership costs​.

• Sun Belt markets: While oversupply has been a concern in Austin, Phoenix, and Raleigh, these areas are expected to rebound by 2027 and beyond​.

What This Means for Investors:

• Long-term rental demand is strong, particularly in urban and high-barrier-to-entry markets.

• Investors in Class A and Class B multifamily properties can benefit from consistent rent growth​.

  
  

Why Multifamily Real Estate is a Strong Investment

Multifamily real estate offers a combination of stability, cash flow, and appreciation.

Here’s why investors continue to favor multifamily over other asset classes:

1. Resilient Demand – People Always Need Housing

Unlike commercial real estate sectors like office or retail, multifamily demand remains steady, even during economic downturns. People will always need a place to live, making apartment investments less cyclical than other real estate types​.

2. Strong Risk-Adjusted Returns

• Multifamily properties historically outperform public equities on a risk-adjusted basis.

• Pricing has adjusted from the peak in early 2022, and multifamily properties are selling for 30% less than peak pricing in some cases, and rent growth supports long-term NOI appreciation​.

  
  

3. Inflation Hedge

• Rents adjust with inflation, allowing landlords to pass rising costs onto tenants.

• Unlike fixed-income investments, multifamily real estate provides inflation-adjusted income growth​.

  
  

  

  Apartment Turnover Continues to sit at record lows

  
  

How to Invest in Multifamily Today

Egg Capital offers two primary ways to invest in real estate:

Option 1: Investing in a Real Estate Syndication

Multifamily syndications allow investors to own shares of large apartment complexes without the responsibility of day-to-day management.

Typical Target Returns: 15-18% IRR, 2.0x equity multiple over 5-7 years.

Cash Flow: 6-8% annually, distributed quarterly.

Tax Benefits: Depreciation and cost segregation provide tax efficiency.

Example Investment: A 250-unit Class B apartment in Charlotte, NC, acquired using a value-add strategy to improve operations, increase rents, and boost property value​.

Option 2: Investing in a Real Estate Debt Fund

Debt funds provide passive, fixed-income returns by lending capital to real estate developers and operators.

Target Returns: 8-12% annual fixed return.

Distributions: Monthly or quarterly.

Lower Risk: Debt is secured by real estate, making it a conservative way to invest, with higher liquidity.

Example Investment: A real estate debt fund providing short-term bridge loans to experienced operators, ensuring steady fixed returns with capital protection​.

Is Now a Good Time to Invest in Multifamily?

YES—Here’s Why:

Rents are projected to keep rising given the supply/demand dynamics

Housing affordability is at record lows, keeping demand for rentals high​.

New supply will slow after 2025, strengthening existing assets​.

Multifamily is a strong hedge against inflation with passive income & tax benefits

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If you have any questions, just leave a comment below or reach out!

Best,

Eric Fitzgerald & Steve Lyerly

Co-Founders, Egg Capital