Resurging Multifamily Housing Starts: Unlocking Short-Term Gains in Real Estate and Construction Sectors

The U.S. multifamily housing market is experiencing a seismic shift. In Q2 2025, housing starts surged 27.4% year-over-year to an annualized rate of 470,000 units—the highest since May 2023. This growth, fueled by robust absorption rates and resilient occupancy levels, has created a unique inflection point for real estate and construction equities. While broader economic uncertainties persist, the sector's divergence between oversupplied Sun Belt markets and high-growth coastal and secondary markets offers fertile ground for short-term cyclical opportunities.

The Drivers of the 2025 Multifamily Boom

The surge in multifamily starts is underpinned by two critical factors: demand resilience and supply normalization. National apartment occupancy rates hit 95.6% in June 2025, with absorption exceeding 227,000 units in Q2 alone. This outpaces even the demand highs of 2021 and early 2022, despite a backdrop of slowing job growth and consumer caution. Meanwhile, the supply of new units is peaking. Completions in 2024 reached 535,000 units, but 2025 deliveries are projected to decline as high borrowing costs and regulatory hurdles curb new projects. This creates a narrowing gap between supply and demand, a tailwind for pricing power and developer margins.

However, the sector is far from uniform. Coastal markets like New York and San Francisco, with occupancy rates above 96%, are outperforming Sun Belt hubs like Austin and Phoenix, where oversupply has dragged rent growth into negative territory. This divergence is key for investors: while Sun Belt REITs face near-term headwinds, secondary markets such as Central East Texas and North Central Florida are emerging as high-conviction opportunities.

Emerging Markets: The New Frontlines of Growth

Central East Texas (the Dallas-Fort Worth to Austin corridor) and North Central Florida (spanning Orlando to Jacksonville) exemplify the sector's short-term potential.

• Central East Texas: Employment growth hit 1.6% in 2024, outpacing the national average. With 3,535 units under construction and a 55.1% year-over-year price-per-unit increase to $132,642, the region's fundamentals are robust. Investment activity totaled $145 million in 2024, signaling strong developer and institutional interest.
• North Central Florida: Spillover demand from Orlando and Jacksonville has driven 3,616 unit completions in 2024, the highest among top emerging markets. The region's 94.0% occupancy rate and 18.4% price-per-unit growth to $186,715 highlight its appeal for capital.

These markets are attracting construction and real estate equities due to their active pipelines, strong job growth, and investor appetite for secondary markets. Developers with expertise in these regions—such as those with legacy land holdings or redevelopment capabilities—are positioned to capitalize on near-term absorption and margin expansion.

ETFs and REITs: Navigating the Cyclical Upswing

For investors seeking diversified exposure, real estate ETFs and targeted REITs offer compelling entry points.

• ETFs: The Janus Henderson U.S. Real Estate ETF (JRE) has outperformed with a 13.31% one-year return, while the iShares Environmentally Aware Real Estate ETF (ERET) and WisdomTree New Economy Real Estate Fund (WTRE) have also delivered double-digit gains. These funds provide broad exposure to REITs with exposure to high-growth multifamily markets.
• REITs: AvalonBay Communities (AVB) and Equity Residential (EQR) are standout performers. AVB's focus on upscale coastal markets like New England and New York positions it to benefit from 2026's expected rent recovery. EQR's shift toward urban cores in Los Angeles and San Francisco aligns with sustained demand for high-density housing.

The Road Ahead: Balancing Risks and Rewards

While the 2025 boom is well underway, investors must remain mindful of near-term risks. Permits for multifamily units fell 9.9% month-over-month in July 2025, signaling a cooling in forward-looking activity. Fannie Mae's revised forecasts—381,000 starts in 2025 and 380,000 in 2026—reflect a more cautious outlook. However, these challenges are temporary. As completions decline in 2026 and demand outpaces supply, pricing power will rebound, particularly in coastal and secondary markets.

Investment Thesis

The multifamily sector is at a pivotal juncture. For short-term gains, focus on ETFs like JRE and REITs like AVB and EQR, which are well-positioned in high-growth coastal and secondary markets. Developers with active pipelines in Central East Texas and North Central Florida should also be prioritized, as these regions offer a blend of strong fundamentals and untapped potential.

As the sector transitions from oversupply to equilibrium, the next 12–18 months will be critical. Investors who act now can capitalize on the inflection point, leveraging the surge in multifamily starts to secure returns before the market's next phase of normalization.