Freddie Mac Forecasts Rising Multifamily Financing in 2025, But Rent Growth Remains Sluggish

As 2025 begins, the multifamily housing market is expected to see an increase in financing activity, but property owners should prepare for continued challenges related to rent growth and rising vacancies. According to Freddie Mac’s latest 2025 Multifamily Outlook, total multifamily originations are projected to reach between $370 billion and $380 billion, marking a rebound from the estimated $320 billion in 2024.

While this increase reflects factors such as postponed transactions, loan maturities requiring refinancing, and stabilization in property values, origination volume will remain below the record highs of 2021 and 2022. For rental housing providers, understanding these trends will be crucial in shaping investment strategies, pricing decisions, and tenant retention efforts throughout the year.

Multifamily Rent Growth and Vacancy Trends

Despite improved financing conditions, rental income is expected to grow at a modest 2.2% in 2025, which remains below the long-term historical average of 2.8%. At the same time, vacancy rates are projected to rise to 6.2%, exceeding the long-run average of 5.5%.

In California, market performance varies significantly by region:

• San Francisco is expected to see 3.2% rental income growth, indicating stronger demand compared to other metros.
• Oakland and Orange County are projected to experience slower growth, with 1.4% and 1.5% rent increases, respectively.
• Riverside is forecasted to perform well, with 3.1% rental income growth, making it one of the strongest markets in the state.

Financing Conditions and Market Adjustments

While more financing opportunities are expected, multifamily interest rates remain high and volatile, influencing refinancing and investment decisions.

• Cap rates have remained relatively stable, fluctuating between 5.6% and 5.7% throughout 2024.
• However, they are still below the long-term average, limiting price adjustments for property owners looking to sell or refinance.

One of the most significant factors affecting rental housing providers is regional supply differences.

• California markets tend to have lower supply ratios compared to the Sun Belt and Mountain West, where new apartment developments have reached record highs.
• Los Angeles and San Francisco are among the cities with some of the lowest supply ratios, helping maintain stronger occupancy rates.
• By contrast, oversupplied metros like Austin and Phoenix are seeing higher vacancy rates and slower rent growth.

What This Means for Rental Housing Providers in 2025

With financing conditions improving but rent growth lagging, property owners need to adapt their strategies to stay competitive. Key takeaways include:

• Rent growth will remain positive but below historical averages, requiring landlords to adjust rental pricing expectations.
• Vacancy rates are expected to rise, making tenant retention strategies essential to maintaining steady cash flow.
• Interest rate stability may encourage more transactions, though financing costs remain a challenge.
• California’s rental markets may see relatively stronger occupancy rates, given limited new supply compared to high-growth metros.

Maximize Your Rental Investment in 2025

Understanding market shifts is essential for protecting and growing your rental investment. At Real Property Management Select, we help property owners navigate changing market conditions with expert property management solutions, proactive tenant retention strategies, and data-driven pricing recommendations.

Stay ahead of the market. Contact us today to learn how we can help you maximize your rental income and reduce vacancy risks in 2025.