**Multifamily Buyer and Seller Sentiment Shows Improvement in Q1 2025**
During the first quarter of 2025, the Federal Reserve announced a slowdown in its Effective Federal Fund Rate. Concurrently, policy developments under the Trump administration exerted influence on the equities market, consumer sentiment, and trade dynamics.
Amid these macroeconomic shifts, sentiment among multifamily buyers and sellers recorded notable improvement, according to a recent survey conducted by CBRE.
Key findings from the survey include:
– **Improved Buyer Sentiment for Core Assets**: Sentiment among core-asset buyers rose significantly, with 65% expressing a positive outlook in Q1 2025. This marks a substantial increase from the 44% reported in Q4 2024.
– **Decreasing Negativity Among Core-Asset Sellers**: Neutral sentiment among core-asset sellers increased to 67% in Q1 2025, compared to 57% in the previous quarter, indicating reduced negativity.
– **Stabilization in Value-Add Sentiment**: Value-add buyers reported an incrementally improved positive-to-neutral outlook, while value-add sellers showed a concentration toward neutral sentiment.
– **Regional Optimism**: The highest levels of positive sentiment were observed in the Sun Belt across all product types, and specifically for core assets in the San Francisco market.
Underwriting assumptions also reflected shifts in response to market dynamics. For core multifamily assets, assumptions improved, whereas they slightly weakened for value-add assets. Annual asking rent growth assumptions held steady at 2.7% for core assets and 3.1% for value-add assets.
“This stability coincides with the current recovery in rent growth following a generational wave of new supply in many of our tracked markets,” noted CBRE analysts.
In terms of capitalization rates:
– **Value-add assets** recorded a going-in cap rate of 5.32% and an exit cap rate of 5.42%.
– **Core assets** had a going-in cap rate of 4.83% and an exit cap rate of 5.01%.
– The spread between going-in and exit cap rates widened for core assets, while narrowing for value-add assets.
CBRE noted that while value-add underwriting metrics weakened slightly in Q1 2025, the outlook remains optimistic. Analysts concluded, “We expect tailwinds in the multifamily sector as investors look to capitalize on improved market fundamentals, particularly in the core segment.”
