Multifamily Market Insider

Occupancy & Vacancy Dynamics

Strong uptake of new and renovated units pushed the national vacancy rate down to 4.8% in Q1, matching the lowest reading since mid-2022 CRE Daily. This translates to 95.2% occupancy in Core markets, driven by urban infill and workforce-housing demand CBRE, while Secondary/value-add properties held a robust 94.5% occupancy as unit turn-times compressed RealPage.
Tertiary markets—those sub-100k-unit metros—were even tighter, averaging 95.9% occupancy, underscoring growing opportunity beyond gateway cities RealPage

Cap-Rate Landscape

Core going-in cap rates remained relatively flat at 4.83%, slipping just 6 bps QoQ amid bidding competition in top 10 markets CBRE. Secondary/value-add cap rates averaged 5.32%, up 7 bps on the quarter to compensate for greater execution risk CBRE.
Freddie Mac research notes that cap-rate spreads have stabilized as mortgage rates plateau, with overall multifamily cap rates “flattening out” despite elevated interest-rate volatility Freddie Mac Multifamily

📉 Fed Policy & Tariff Impacts

On May 7, 2025, the Fed held the federal funds rate at 4.25–4.50%, warning that Trump-era tariffs raise both inflation and unemployment risks—adopting a “patient” stance until clearer data emerges ReutersReuters. Tariffs on steel, lumber, and building materials have pushed mortgage rates to 6.7% and added $10,900 in per-home material costs, slowing home sales to 2009 lows and dampening construction starts Financial Times

🏦 Agency Debt Outlook

The FHFA set 2025 multifamily purchase caps at $73 billion per GSE (Fannie Mae and Freddie Mac), a 4% bump over 2024’s $70 billion, ensuring $146 billion in liquidity while maintaining a 50% mission-driven affordable housing requirement FHFA.gov. Workforce housing loans remain exempt, reinforcing support for underserved segments. This steady increase reflects FHFA’s confidence in market forecasts and its commitment to balanced public-private participation.

📈 Mezzanine Financing Surge

Mezzanine debt lender Nectar funded deals spanning 1,359 units in Q1 2025, with ticket sizes of $0.6–$2.3 million. CEO Derrick Barker attributes the uptick to “liquidity gaps created by higher rates” and sponsors seeking flexible capital beyond senior lenders Multifamily Executive. For sponsors, mezzanine offers bridge funding without full refinance; for investors, it delivers higher, predictable returns backed by cash-flowing assets.

1031 Like-Kind Exchanges

A 1031 exchange allows investors to defer capital gains taxes indefinitely by reinvesting sale proceeds into one or more qualifying properties of equal or greater value within IRS-mandated timelines (identify within 45 days, close within 180 days). DoorLoopBusiness InsiderIn one recent case, a couple used a 1031 exchange to swap an underperforming fourplex for two higher-cash-flow properties—boosting monthly net income from $400 to $1,700 overnight while deferring a six-figure tax liability. Business Insider

Cost Segregation Studies

By reclassifying property components into shorter-lived asset classes, cost segregation accelerates depreciation deductions—often front-loading 20–40% of an asset’s basis into the first five years, thereby slashing taxable income and boosting early-year cash flow. Colony Hills CapitalEven as bonus depreciation phases down (phasing out entirely by 2027), a well-executed cost segregation study can deliver meaningful tax savings for multifamily investors through 2025 and beyond. ELB Consulting

Opportunity Zone Investments

Opportunity Zones offer investors with eligible capital gains the chance to defer—and potentially reduce—taxes by redeploying gains into designated distressed communities via qualified Opportunity Funds CoStar. Since inception, these zones have attracted nearly $100 billion of private capital into multifamily and mixed-use projects, driving both community revitalization and investor returns. The New Localism

Delaware Statutory Trusts (DSTs)

DSTs provide a passive, hands-off alternative for 1031 exchanges, pooling investor dollars into professionally managed, income-producing real estate while preserving tax-deferral benefits Cornerstone Wealth Group. Investors gain access to institutional-grade multifamily assets with lower minimums, diversified portfolios, and predictable quarterly distributions—without day-to-day property management burdens. Origin Investments

Strategic Considerations & Best Practices

To safeguard tax-deferral status, investors must strictly adhere to the 45/180-day identification and closing windows, leveraging a qualified intermediary to facilitate each step under IRS guidelines. Business InsiderEngaging experienced tax advisors and 1031-exchange specialists upfront ensures optimal structuring, compliance, and alignment with long-term wealth goals. Business Insider