Multi-Family Construction Expected to Slide in 2025 Before Seeings More Demand in 2026

Multi-family construction is one of the more volatile niches in the construction market, with annual changes in U.S. total multi-family activity often swinging by thousands of units. Homeowner demand, interest rates and the stomach for speculative projects combine to shape the market potential for apartments, condominiums, townhouses, senior-citizen homes and other types of multi-family construction. 

Although multi-family fell off dramatically in 2024, economists expect it to rebound this year. At the International Builders Show in Las Vegas earlier this year, the National Association of Home Builders  (NAHB) released a press release that said, “Supply-chain problems and high interest rates are expected to impede the multi-family sector in the first half of 2025 before the market stabilizes later this year as more deals pencil out.”

NAHB said in another post that in 2024 that, “Multi-family construction saw a significant decline as starts fell -25% to a rate of 355,000. There were approximately 1 million apartments under construction — the highest rate since 1973 — which put a damper on the apartment market.
“NAHB is projecting that multi-family construction will decline again in the first half of 2025 before moving back to long-term trends toward the end of the year as the market works though a substantial number of units under construction,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis.

NAHB is expecting multi-family starts to fall -11% this year to a rate of 317,000 while increasing +6% in 2026 to 336,000. The association said confidence in the market for new multi-family housing reflected mixed results in the most recent NAHB Multifamily Market Survey (MMS). While the Multifamily Production Index (MPI) increased seven points to 48 year-over-year, it’s still below the break-even point of 50 points.

The wild swings in demand for new multi-family units are also apparent in the 50 largest Metropolitan Statistical Areas (MSAs) for 2024 annual permits for projects of 5 units or more (see table below). For example, with 42,230 permits pulled in 2024, the New York-Newark-Jersey City, NY-NJ-PA, MSA saw multi-family permits increase +60.8% (15,963 permits). The Atlanta-Sandy Springs-Alpharetta, GA, MSA, saw a big swing in the other direction, with a YOY decline of -6,360 permits (-29.8%).
As is the case with much local market data, a handful of metros account for the lion’s share of construction activity. For example, 50 metropolitan areas accounted for 72.5% of permits for dwellings of 5 units or more.

Interestingly, the 10 largest metros accounted for 37.2% of these permits: New York-Newark-Jersey City, NY-NJ-PA, MSA (42,230 permits); Dallas-Fort Worth-Arlington, TX , MSA (22,912 permits); Austin-Round Rock-Georgetown, TX, MSA (15,008 permits); Atlanta-Sandy Springs-Alpharetta, GA, MSA (13,937 permits); Phoenix-Mesa-Chandler, AZ, MSA (13,577 permits); Los Angeles-Long Beach-Anaheim, CA, MSA (13,265 permits); Houston-The Woodlands-Sugar Land, TX, MSA (11,520 permits); Miami-Fort Lauderdale-Pompano Beach, FL, MSA (10,035 permits); Seattle-Tacoma-Bellevue, WA , MSA (9,880 permits); and Washington-Arlington-Alexandria, DC-VA-MD-WV, MSA (9,680 permits).

The latest permit data for multi-family housing was positivie. March permits for buildings with 5 or more units came in strong on a national basis, running at a 445,000 rate for a +10.5% increase over February, but running about even with March 2024 with a -0.9% decrease.

Some large multi-family projects that broke ground recently include the $675- million Utopia Living project in Flushing, NY; the $510-million St. Regis Residences in Miami, FL; the 345-million 222 North City project in San Marcos, CA; the $312-million Calyer Place project in Greenpoint, NY: and the $210-million Ritz-Carlton Residences in The Woodlands, TX.