Buckingham Breakdown – 2025 Q2 Overview – Have We Reached the Bottom of Multifamily Valuations?

The second quarter of 2025 has offered further clarity on the state of the multifamily market, and the data suggests that we may be nearing, or perhaps already standing on, a cycle bottom. Much like the first quarter, valuations continued to show significant declines, with pricing down 25–30% on the same rent roll when compared to recent years. The most pronounced impact has been felt among commercial multifamily assets of five units and above, where the rise in interest rates has been particularly damaging. New commercial real estate debt is hovering in the 6–6.25% range, leaving little room for optimism among owners and investors alike. What began as a promising start to the year quickly deteriorated under the weight of new administration policies, including the imposition of Liberation Day tariffs, which injected fresh uncertainty into financial markets and drove bond yields sharply higher. That move, in turn, reinforced persistently elevated borrowing costs across commercial real estate.

Beneath the aggregate numbers lies a stark divide between smaller 2–4 unit properties and larger 5+ unit commercial multifamily assets. Smaller residential properties remain resilient, trading at GRMs in the mid-16s and cap rates in the low-4% range. Sellers in this space face little distress, as pricing has held firm and demand remains steady. The story is very different on the commercial side. Properties with five or more units are now trading at an average 5.4% cap rate and a 12.5 GRM, including in higher-quality submarkets. In more investment-grade or working-class areas, cap rates are even higher, echoing levels not seen since the aftermath of the Great Financial Crisis. The result is a full-cycle reset in valuations for commercial multifamily, a painful reality for owners but a compelling entry point for investors seeking long-term opportunity.

For buyers, the current market offers several unique advantages. Elevated cap rates in the 6–6.5% range on in-place income, paired with borrowing costs of 6–6.25%, have created conditions for positive operating financial leverage in certain transactions—a rarity in recent years. Additionally, the wide valuation gap between smaller and larger multifamily properties presents a strong incentive for investors to exchange into larger assets at relatively favorable terms. Transaction volume has already begun to reflect this shift, suggesting that capital long sitting on the sidelines is beginning to re-enter the market. For investors with conviction, this period could represent the inflection point of the cycle.

Despite these encouraging signs, risks remain. A significant wave of five-year fixed loans originated during the low-rate environment of 2020 is now beginning to reset, adding financial pressure on owners. With payments increasing and refinancing often unfeasible, many are being forced into difficult decisions, including property sales. This dynamic has already pushed inventory to roughly 759 active listings at the close of Q2—the highest level since 2011. Should this trend persist, pricing could see further downward pressure in quarters to come.

Industry analysts are largely calling a bottom in pricing across national markets, pointing to rising transaction activity and a growing pool of opportunistic buyers. While equity losses have been severe, the reentry of sidelined capital is a promising sign that the market is healing. Locally, the data suggests that multifamily valuations may have reached their trough, though the
path forward will remain uneven as inventory works through the system. For now, the evidence points to an inflection point: a market that has endured three years of persistent pressure may finally be finding its footing. As always, the broker’s perspective leans optimistic—an occupational hazard, perhaps—but with transaction volume rising, investor appetite reawakening, and valuations stabilizing, there is reason to believe that brighter days could soon return to the multifamily sector.