Rents Show Signs of Growth
After months of negative rent growth, the national average asking rent ticked up by $3 in January, reaching $1,746. The slight increase may seem modest, but it marks a reversal in the trend, signaling potential stability ahead. Markets leading this growth include metros in the Northeast (New York City, New Jersey, Philadelphia) and Midwest (Detroit, Kansas City, Chicago), reinforcing the value of diversification across geographies.
Demand Drivers Remain Strong
A key question for investors is whether demand will match the record levels seen in 2024, which saw 400,000 units absorbed, one of the highest on record. Several indicators suggest sustained demand:
- Job Growth: The economy continues to add jobs, with 256,000 new jobs in December alone.
- Household Formation: More young adults are moving out of their parents’ homes, reversing pandemic-era trends.
- High Mortgage Rates: With homeownership increasingly out of reach, apartment retention rates are at record highs.
For passive investors, these factors point to the continued appeal of multifamily investments, particularly in markets with stable employment and population growth.
Supply and Occupancy Trends
Despite strong demand, the influx of new apartment deliveries has impacted occupancy rates, which declined to 94.5% in December, the lowest since early 2014. Some high-growth markets, including Austin, Raleigh-Durham, Charlotte, Nashville, Denver, and Phoenix, are seeing both negative rent growth and declining occupancy despite high demand. This signals potential challenges in oversupplied markets but also opportunities for savvy investors to identify value-add plays.
Key Takeaways for Passive Investors
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Geographic Diversification Matters – Northeast and Midwest markets are currently performing well, while some Sun Belt cities face supply headwinds.
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Stay Focused on Demand Fundamentals – Job growth and household formation trends remain favorable for multifamily investing.
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Monitor Supply Pipelines – Oversupply in certain markets may impact near-term cash flow but could present long-term acquisition opportunities at discounted valuations.
Final Thoughts
The start of 2025 provides encouraging signs for multifamily investors, particularly those focused on stable, well-located assets. While rising supply poses challenges in some areas, the demand fundamentals remain strong. Passive investors who stay informed and strategically allocate capital can continue to find solid opportunities in the multifamily sector.
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About Ellie Perlman
At Blue Lake Capital, Ellie and her team work exclusively with family offices and accredited investors, offering carefully curated investment opportunities that emphasize long-term wealth creation, stability, and risk-adjusted returns. A defining aspect of Blue Lake’s investment strategy is its integration of advanced AI-driven analytics and data science into the entire lifecycle of acquisitions and asset management. By leveraging cutting-edge technology, the firm executes data-driven forecasting on market trends, asset performance, and tenant behavior, ensuring strategic decision-making and optimized returns.
In addition to leading Blue Lake Capital, Ellie is the original founder and host of "REady2Scale - Real Estate Investing" podcast, which provides insights into multifamily real estate, alternative investments, and finance.
Ellie began her career as a commercial real estate attorney, structuring and negotiating complex transactions for one of Israel’s leading development firms. She later transitioned into property management, overseeing over $100M in assets for Israel’s largest energy company.
Ellie holds a Master’s in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can learn more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
