Multifamily Market Update: Q1 2025 Texas and National Overview
National Market Overview
The U.S. multifamily sector demonstrated resilience in Q1 2025, with net absorption reaching approximately 130,000 units—the highest first-quarter total since the early pandemic era. This surge in demand is attributed to stable employment growth and demographic trends, particularly as younger generations enter prime renting years. Concurrently, new apartment deliveries declined significantly, with projections indicating a nearly 40% year-over-year drop to around 401,000 units, marking the lowest annual completions in six years. This reduction in new supply is aiding in the stabilization of previously oversupplied markets, setting the stage for potential rent growth and occupancy improvements later this year and into 2026. Nationally, rent growth averaged 1.1% year-over-year, with Midwest markets like Chicago and Kansas City leading gains of over 3%, benefiting from relatively constrained construction pipelines.
Texas Market Insights
Austin
Austin's multifamily market showed signs of stabilization in Q1 2025, with renters absorbing nearly 4,600 units—the second-highest first-quarter absorption since 2000. This marked the first time in over three years that absorption outpaced new completions. Despite this positive trend, the significant influx of approximately 26,000 units delivered in the past year continues to exert downward pressure on rents, which declined by nearly 4% year-over-year to an average of $1,552 per month. Occupancy rates remain around 90.4%, but urban areas such as Downtown, East, and West Austin are beginning to see occupancy gains, indicating a potential recovery starting from the city's core. With new unit deliveries falling by 33% from previous quarters and future construction slowing, Austin is poised for a gradual market balance recovery, though full rent stabilization and positive growth may not occur until late 2025 or early 2026.
Dallas-Fort Worth (DFW)
Dallas-Fort Worth experienced a notable turnaround in apartment demand, absorbing over 7,350 units in Q1 2025—the best first-quarter performance since early 2021. Despite strong absorption, occupancy rates remain around 91% due to the substantial supply of units delivered over recent years. Rent growth continues to be slightly negative at -0.7%, though improving by 90 basis points quarter-over-quarter, indicating gradual stabilization. Construction activity has significantly slowed to approximately 31,000 units underway, a sharp decline from a peak of 64,000 units in mid-2023. Transaction volume surged dramatically in Q1 2025, more than doubling year-over-year to reach $1.42 billion, reflecting returning investor confidence and highlighting DFW's continued appeal to multifamily investors.
Houston
Houston's multifamily market has shown greater stability compared to other Texas metros, posting a modest positive rent growth of 0.6%, with rents averaging around $1,358 per month. The market absorbed approximately 3,885 units during the quarter, surpassing new completions for the first time since mid-2021, indicating strengthening demand, particularly in mid-tier suburban submarkets. Construction has notably slowed, with only about 11,800 units underway—the lowest since 2018—significantly reducing future supply pressure. The occupancy rate has remained relatively stable at around 90%, influenced positively by ongoing strong renter absorption. Investor activity in Houston has also increased, with transaction volumes rising nearly 12% year-over-year to $2.57 billion, although pricing per unit experienced about a 10% decline, reflecting market adjustments to recent oversupply pressures.
San Antonio
San Antonio continues to face challenges, experiencing its eighth consecutive quarter of negative year-over-year rent growth, with rents declining by 1% to an average of $1,262 per month. However, renter demand has remained consistently positive, with 2,256 units absorbed in Q1 alone. Occupancy remains historically low at 88.3%, primarily driven by an elevated number of new units still leasing up rather than weak demand. New construction starts are now at their lowest in over a decade, with just 4,400 units currently underway, suggesting that San Antonio's market conditions are poised for gradual improvement. If demand remains robust through the traditionally strong spring and summer leasing periods, San Antonio could see modest rent growth returning toward the end of 2025.
Capital Market Dynamics
Across Texas metros, multifamily investment activity varies. Dallas-Fort Worth leads with exceptionally strong investment activity, reaching $1.42 billion in transaction volume in Q1 2025 alone, reflecting a sharp increase of 123% year-over-year. Houston's market also strengthened, achieving $2.57 billion annually in 2024, although per-unit pricing dropped around 10%. Austin and San Antonio faced reductions in transaction volumes and pricing, with declines in per-unit prices of approximately 12% and 10%, respectively. Private buyers continue to dominate transactions across all Texas markets, although institutional buyers are showing increasing signs of re-entering these markets.
Strategic Investor Insights
The multifamily market is entering a new phase, influenced by several macroeconomic factors:
Tighter Financing Conditions: Higher interest rates and a more selective construction lending environment have significantly slowed new multifamily development. This deceleration is particularly evident in higher-cost metropolitan statistical areas (MSAs), where deals are harder to finance. While this slowdown poses short-term challenges, it sets up future supply-demand imbalances that are likely to benefit existing assets.
Rising Construction Costs: The introduction of a 10% baseline tariff on all imports, along with higher targeted duties on key trading partners, has increased construction material costs. Coupled with rising labor costs and ongoing skilled labor shortages, these factors contribute to delays, cancellations, and cost overruns in new multifamily developments, further limiting the pace of new deliveries.
Supply Constraints Fuel Potential Rent Growth: As new supply slows and demand remains resilient, multifamily rents are poised to re-accelerate, particularly in well-located, professionally managed assets. Markets with strong population and job growth are expected to experience a steady tightening of available inventory over the next 12 to 18 months.
For investors, these trends highlight the importance of strategic positioning. A disciplined investment approach that prioritizes well-located, high-demand assets will be essential to navigating the evolving market. Understanding the impact of financing conditions and construction costs on project feasibility is critical for making informed decisions.
Outlook for the Remainder of 2025
The multifamily market across Texas and nationally appears set for a measured, steady recovery trajectory throughout the rest of 2025, characterized by improving occupancy, modest rent stabilization, and increasing investor confidence. The significant slowdown in new construction starts across all major Texas metros will help existing inventory stabilize and gradually strengthen occupancy levels, setting a foundation for rent recovery later in the year. Mid-tier properties have emerged as particularly resilient, maintaining relatively stable occupancy and rents despite broader market challenges, making them attractive investment targets. Urban core areas across Dallas, Houston, and Austin are beginning to stabilize and show early occupancy gains as development activity cools significantly.
About Brookeast Capital:
Brookeast Capital is a multifamily investment firm dedicated to helping investors grow and protect their wealth while achieving passive cash flow. With a focus on strategic acquisitions and value-add strategies, Brookeast Capital delivers exceptional returns by acquiring, repositioning, and managing multifamily apartment properties.
Our team combines in-depth market research with proven expertise to identify lucrative opportunities, maximize asset value, and return capital to our investors upon executing our business plans. We pride ourselves on creating long-term partnerships with our investors, ensuring transparency and trust throughout the investment process.
Join Brookeast Capital in building a stronger financial future. Explore how you can benefit from the dynamic multifamily market by scheduling your personalized consultation today. Let us help you take the next step toward achieving your investment goals.
