{"id":185671,"date":"2025-11-14T11:00:37","date_gmt":"2025-11-14T18:00:37","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=185671"},"modified":"2025-11-14T11:10:46","modified_gmt":"2025-11-14T18:10:46","slug":"why-multifamily-is-not-in-a-bubble","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/why-multifamily-is-not-in-a-bubble","title":{"rendered":"Worried About an Asset Bubble? Then You’ll Be Happy to Hear That Multifamily is Definitely Not in One"},"content":{"rendered":"\n

Is every asset class in a bubble? <\/span><\/p>\n\n\n\n

Whether you think so or not, the fears are all too plausible. Despite the longest government shutdown in history, reheating inflation, continuing tariff fears, a weakening labor market, and fraying geopolitical ties, the S&P 500 just recently notched a record high and remains close to it as I write this. The index has soared 19.6% over the last year. <\/span><\/p>\n\n\n\n

Big tech and artificial intelligence (AI) stocks look particularly bubblicious. Nvidia\u2019s stock has skyrocketed 416% over the last two years, and the industry keeps announcing <\/span>circular deals<\/span><\/a> among the same few companies. <\/span><\/p>\n\n\n\n

Then there\u2019s gold, up over 102% over the last two years, more than doubling its prior record. And that\u2019s supposed to be the safe-haven asset. <\/span><\/p>\n\n\n\n

Even single-family home prices (<\/span>averaging around $364K<\/span><\/a>) continue hovering near record highs (~$366K) from earlier in the year. <\/span>That comes <\/span>in the face of<\/span> a supply surge, longer days on market, and weakening income growth <\/span>compared<\/span> to inflation.<\/span> <\/span><\/p>\n\n\n\n

As for cryptocurrencies, which run on pure speculation, the word \u201cbubble\u201d is never far from investors\u2019 lips. <\/span><\/p>\n\n\n\n

Yet I can think of at least one asset class that isn\u2019t in a bubble: <\/span>multifamily real estate<\/span><\/a>.<\/span><\/p>\n\n\n\n

Multifamily\u2019s Bubble Already Burst<\/span><\/h2>\n\n\n\n

There was a bubble in multifamily real estate in 2020-2022\u2014and it burst. <\/span><\/p>\n\n\n\n

Over the two years from the second quarter of 2022 to the second quarter of 2024, the Fed\u2019s Multi-Family Real Estate Apartment Price Index fell 25.2%. That\u2019s not a correction; it\u2019s a crash. No, worse than a crash: a bear market. <\/span><\/p>\n\n\n\n

When single-family home prices fell <\/span>a similar amount in the Great Recession<\/span><\/a>, people panicked. But the <\/span>multifamily collapse<\/span><\/a> barely made the news outside financial circles, because so few Americans own an interest in multifamily properties. <\/span><\/p>\n\n\n\n

Prices <\/span>reached a bottom<\/span> in the second quarter of 2024<\/span>, <\/span>and over the next year <\/span>rose 5.5%<\/span> (the most recent data available).<\/span> Freddie Mac\u2019s <\/span>Apartment Investment Market Index<\/span><\/a> shows 7.6% growth over the last year. <\/span><\/p>\n\n\n\n

(embed graph from: <\/span>https:\/\/mf.freddiemac.com\/aimi<\/span><\/a>) <\/span><\/p>\n\n\n\n

Look at multifamily prices (the blue line) versus net operating incomes (the orange line), leading up to the Financial Crisis. <\/span>They diverge <\/span>far apart<\/span>, then converge <\/span>closer together<\/span> after the correction.<\/span> That\u2019s the same pattern that is playing out right now. <\/span><\/p>\n\n\n\n

Multifamily prices and NOI haven\u2019t been this close together since 2012, creating a bargain for investors. \u201cWe\u2019re seeing a healthier equilibrium between income and valuations,\u201d real estate investor Austin Glanzer of <\/span>717HomeBuyers<\/span><\/a> told BiggerPockets. \u201cFor long-term investors, this looks like a rare asset where you\u2019re buying after the bubble, not before it.\u201d<\/span><\/p>\n\n\n\n

Opportunities for Distressed Sales<\/span><\/h2>\n\n\n\n

Far too many operators overpaid in the bubble of 2020-2022<\/span>, <\/span>and bought with <\/span>floating interest<\/span> bridge loans.<\/span> Those loans have been coming due<\/span>, <\/span>or driving cash flows underwater, <\/span>and it\u2019s<\/span> forcing many operators to sell at a steep loss.<\/span> <\/span><\/p>\n\n\n\n

As a real estate investor, you know the best bargains come from distressed sales. I don\u2019t need to belabor the point. <\/span><\/p>\n\n\n\n

I will say that<\/span> I have seen this firsthand in our co-investing club.<\/span> We\u2019ve invested in multifamily properties over the last six months, when the operator bought the property at a <\/span>huge<\/span> discount because it was in foreclosure. <\/span><\/p>\n\n\n\n

Why Multifamily <\/span>Is Poised<\/span> for a Rebound<\/span><\/h2>\n\n\n\n

Multifamily real estate has had a rough few years, while stocks, gold, crypto, and single-family homes kept soaring. <\/span><\/p>\n\n\n\n

That\u2019s precisely why multifamily <\/span>is poised<\/span> for recovery. <\/span>Developers have pulled back on building permits <\/span>in multifamily<\/span>.<\/span> Redfin reports a <\/span>23% drop<\/span><\/a> since the pandemic peak in apartment building permits over the last year. With less new supply hitting the market, rents will likely resume their upward march after stalling in much of the country over the <\/span>last<\/span> year. Concessions will likely ease, and NOIs will rise. <\/span><\/p>\n\n\n\n

People need a place to live, after all. And reduced new supply will help drive values higher. <\/span><\/p>\n\n\n\n

Options for Investing in Multifamily<\/span><\/h2>\n\n\n\n

You could buy an apartment complex by yourself, of course. But most of us don\u2019t have $10 million just sitting around collecting dust. <\/span><\/p>\n\n\n\n

Alternatively, you can buy shares in <\/span>REITs<\/span><\/a>. On the plus side, you can <\/span>buy<\/span> shares with small amounts, and they\u2019re liquid. <\/span>But the <\/span>problem with REITs<\/span><\/a> is that they share too close a correlation with the stock market <\/span>at large<\/span>, which defeats the purpose of diversifying into real estate.<\/span> <\/span><\/p>\n\n\n\n

You could also invest in multifamily real estate syndications, which come with their own pros and cons. The <\/span>greatest<\/span> downside: They come with a huge minimum investment ($50,000 to $100,000). <\/span><\/p>\n\n\n\n

If you invest by yourself, that is. <\/span>Personally,<\/span> I invest <\/span>as a member of<\/span> a co-investing club, where we meet on Zoom every month to vet a new passive real estate investment.<\/span> We can each go in with $5,000 or more if we like that particular investment. <\/span>Best of all, we <\/span>get the<\/span> benefit <\/span>of<\/span> each other’s expertise <\/span>in vetting<\/span> the risk together.<\/span> <\/span><\/p>\n\n\n\n

Lastly, you can invest in private equity real estate funds. Most <\/span>don\u2019t allow non-accredited investors<\/span><\/a>, however. <\/span><\/p>\n\n\n\n

Where Is Multifamily Headed?<\/span><\/h2>\n\n\n\n

The multifamily market is finally stabilizing after sharp swings during and after the pandemic. <\/span><\/p>\n\n\n\n

In the pandemic, eviction moratoriums effectively froze rents at artificially low levels. When moratoriums lifted, the rubber band released, and rents shot upward. They rose too far, too fast in many markets, even as construction of new apartment buildings flooded those same markets with supply. <\/span><\/p>\n\n\n\n

In the last 18 months, rents cooled and even dropped in many markets\u2014a rare occurrence. Rents are now entering their winter rest period, poised for stronger growth in 2026. \u201cRent growth is normalizing after a post-pandemic whipsaw, expense pressures have begun to stabilize, and construction starts have slowed to pre-pandemic levels,\u201d real estate investor Oren Sofrin of <\/span>Eagle Cash Buyers<\/span><\/a> told BiggerPockets. <\/span><\/p>\n\n\n\n

Personally, I don\u2019t time the market. I practice <\/span>dollar-cost averaging<\/span><\/a> with my real estate investments: investing $5,000 a month, every month, through the co-investing club. <\/span><\/p>\n\n\n\n

But when people ask my opinion on the multifamily market right now, I actually think it\u2019s one of the few asset classes that looks like a bargain. Sofrin agrees: \u201cFrom a risk-adjusted standpoint, multifamily may be one of the few corners of real estate where future appreciation potential exceeds embedded downside risk.\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Is every asset class in a bubble?  Whether you think so or not, the fears are all too plausible. Despite the longest government shutdown in history, reheating inflation, continuing tariff […]<\/p>\n","protected":false},"author":158586,"featured_media":184598,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4433],"tags":[],"class_list":["post-185671","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185671","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/158586"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=185671"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/185671\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/184598"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=185671"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=185671"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=185671"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}