We’re dealing with a pretty unusual mix of political, labor, and economic signals at the moment. It’s been a challenging environment to read, but a few key patterns are starting to emerge. Here’s a quick breakdown of the themes we’re watching most closely.
Political Pressure Is Starting to Reshape Demand and Labor
Immigration has been a big demand driver for multifamily over the last few years. That trend is being impacted—fast. Based on Goldman Sachs’ latest estimates, net immigration is expected to drop to around 750,000 people a year. That’s well below recent levels and a clear shift from what’s driven rental demand. While we are stil seeing domestic trends of net migration towards markets like Texas, Florida, and the Southwest, the aggregate impact at a national level could still be meaningful.
What’s more concerning is the broader tone around enforcement. We’re seeing signs of a serious pickup in deportations, and that creates risk on both sides of the supply/demand equation. On the demand side, fewer new households means slower lease-up and weaker rent growth. On the supply side, an immigration crackdown could put a real strain on the construction labor force. In some trades, undocumented workers make up 15–20% of the workforce. If those workers stop showing up—or if employers stop hiring them—it’s going to be harder and more expensive to build.
There’s also the risk of disruption. If people are afraid to go to work, or if employers are afraid to hire them, some projects could stall or go unfinished, especially in the Sunbelt where a lot of development has leaned heavily on this labor pool.
Tariffs Could Push Material Costs Higher
We’re also keeping an eye on tariffs, which seem likely to stick around—and possibly even increase—starting in April. Contractors are already getting “heads up” notices from suppliers about possible price hikes. While costs haven’t jumped yet, the uncertainty is real. One GC I spoke with last week said he’s now adding more contingency to bids just to account for the unknowns. That makes underwriting tougher and is starting to affect how (and if) deals pencil.
Higher material costs could mean delayed starts or fewer projects breaking ground, especially for developers already dealing with tighter financing. That, in turn, could impact future supply levels. If demand stays flat or slips a bit but supply dries up even faster, we may start to see more bifurcation between new, high-end product and older Class B/C stock.
The Interest Rate Environment Is Still the Big Wildcard
Rates remain the big story. While inflation is more under control, the Fed hasn’t given us much to hang onto in terms of cuts. The 10-year Treasury is still elevated and extremely volatile, cap rates haven’t budged much, and the refinancing window is starting to close for a lot of borrowers.
There’s around $578 billion in commercial real estate loans maturing in 2025. That’s a massive number, and a good chunk of it is in multifamily. Many of those loans were written in 2020–2022 at historically low rates. Anyone coming due now is looking at significantly higher debt service, and the math often doesn’t work.
What does that mean?
- We could see more forced sales. Owners who can’t refinance may have to sell, even if pricing is weaker.
- We might see more distress quietly build. It won’t all hit the market at once, but some cracks are forming—especially in deals that relied on aggressive rent growth projections or were too thinly capitalized.
- Equity is staying on the sidelines. Many investors are in wait-and-see mode, especially when valuations are still adjusting and cap rates remain sticky.
The broader takeaway: high rates are squeezing both ends of the business. Borrowing is more expensive, and buyer appetite is more cautious. The capital stack is under pressure, and that’s not going to change overnight.
Closing Thoughts
We’re in a tricky part of the cycle. Demand growth is softening, costs are rising, and capital markets aren’t offering much flexibility. That doesn’t mean it’s time to panic—but it does mean we need to stay sharp, underwrite more conservatively, and keep plenty of dry powder for the right opportunities.
There will be deals—especially in situations where strong assets are forced to trade. But we’re past the easy money phase, and now is the time for careful, fundamentals-based decision-making.
To learn more about how we can help you to generate superior investment results through professionally managed Real Estate investments, click here to register for our investor club.
Reading the Signals: What’s Really Pressuring the Multifamily Sector Right Now
We’re dealing with a pretty unusual mix of political, labor, and economic signals at the moment. It’s been a challenging environment to read, but a few key patterns are starting to emerge. Here’s a quick breakdown of the themes we’re watching most closely.
Political Pressure Is Starting to Reshape Demand and Labor
Immigration has been a big demand driver for multifamily over the last few years. That trend is being impacted—fast. Based on Goldman Sachs’ latest estimates, net immigration is expected to drop to around 750,000 people a year. That’s well below recent levels and a clear shift from what’s driven rental demand. While we are stil seeing domestic trends of net migration towards markets like Texas, Florida, and the Southwest, the aggregate impact at a national level could still be meaningful.
What’s more concerning is the broader tone around enforcement. We’re seeing signs of a serious pickup in deportations, and that creates risk on both sides of the supply/demand equation. On the demand side, fewer new households means slower lease-up and weaker rent growth. On the supply side, an immigration crackdown could put a real strain on the construction labor force. In some trades, undocumented workers make up 15–20% of the workforce. If those workers stop showing up—or if employers stop hiring them—it’s going to be harder and more expensive to build.
There’s also the risk of disruption. If people are afraid to go to work, or if employers are afraid to hire them, some projects could stall or go unfinished, especially in the Sunbelt where a lot of development has leaned heavily on this labor pool.
Tariffs Could Push Material Costs Higher
We’re also keeping an eye on tariffs, which seem likely to stick around—and possibly even increase—starting in April. Contractors are already getting “heads up” notices from suppliers about possible price hikes. While costs haven’t jumped yet, the uncertainty is real. One GC I spoke with last week said he’s now adding more contingency to bids just to account for the unknowns. That makes underwriting tougher and is starting to affect how (and if) deals pencil.
Higher material costs could mean delayed starts or fewer projects breaking ground, especially for developers already dealing with tighter financing. That, in turn, could impact future supply levels. If demand stays flat or slips a bit but supply dries up even faster, we may start to see more bifurcation between new, high-end product and older Class B/C stock.
The Interest Rate Environment Is Still the Big Wildcard
Rates remain the big story. While inflation is more under control, the Fed hasn’t given us much to hang onto in terms of cuts. The 10-year Treasury is still elevated and extremely volatile, cap rates haven’t budged much, and the refinancing window is starting to close for a lot of borrowers.
There’s around $578 billion in commercial real estate loans maturing in 2025. That’s a massive number, and a good chunk of it is in multifamily. Many of those loans were written in 2020–2022 at historically low rates. Anyone coming due now is looking at significantly higher debt service, and the math often doesn’t work.
What does that mean?
The broader takeaway: high rates are squeezing both ends of the business. Borrowing is more expensive, and buyer appetite is more cautious. The capital stack is under pressure, and that’s not going to change overnight.
Closing Thoughts
We’re in a tricky part of the cycle. Demand growth is softening, costs are rising, and capital markets aren’t offering much flexibility. That doesn’t mean it’s time to panic—but it does mean we need to stay sharp, underwrite more conservatively, and keep plenty of dry powder for the right opportunities.
There will be deals—especially in situations where strong assets are forced to trade. But we’re past the easy money phase, and now is the time for careful, fundamentals-based decision-making.
To learn more about how we can help you to generate superior investment results through professionally managed Real Estate investments, click here to register for our investor club.