Higher Rates Are Resetting the Acquisitions Math
The Fed is on pause, a new administration is rewriting parts of the real estate playbook, supply is finally slowing, and the distressed-loan logjam is starting to break. Here’s how we’re reading the first month of 2025.
January was an unusually productive month for our team and, more importantly, a clarifying one for the market. The headline data didn’t move dramatically, but enough cross-currents shifted—the Fed’s tone, the new administration’s tax agenda, the supply trajectory, the maturing-loan picture—to materially change how we’re underwriting acquisitions across our target markets.
The Fed Held—and Got Less Confident on Inflation
The Federal Reserve held the target range at 4.25%–4.50% on January 29, after three straight cuts to close 2024. The post-meeting statement dropped its prior reference[1] to inflation “making progress” toward 2%, a small wording change with a clear directional message: the Fed is less convinced that inflation is in retreat than it was two months ago. Markets are now pricing the next cut no earlier than June.
For our underwriting, this matters in two ways. First, the cost of capital we’re seeing today is closer to the cost of capital we’ll be refinancing into than consensus assumed at the end of 2024. Second, “higher for longer” is finally being respected by sellers. Pricing expectations are recalibrating, particularly on 1970s–1980s vintage assets where the buyer pool has narrowed materially. We continue to favor conservative leverage and underwrite to today’s debt costs rather than to a rate-cut narrative that keeps slipping.
A business plan that only pencils if the Fed cuts is a macro bet. We’d rather buy at a basis that works at today’s rates.
A New Administration’s Real Estate Agenda
The incoming administration is moving quickly on a set of priorities that directly affect multifamily underwriting. The 20% pass-through deduction (Section 199A), 100% bonus depreciation, and the Opportunity Zone program are all on the table for extension or renewal, and there is renewed political appetite for ending government conservatorship of Fannie Mae and Freddie Mac[2]. Treasury Secretary Scott Bessent and HUD Secretary Scott Turner are both viewed as supportive of OZ reform, with Bessent focused on tax clarifications and Turner more likely to push OZ-driven affordable housing.
The cross-currents are real, however. Proposed tariffs on building materials and tighter immigration enforcement would lift construction costs and labor expenses at exactly the moment the development pipeline has slowed. For our acquisitions strategy this is net favorable: anything that suppresses new supply benefits well-located in-place assets we already own or are underwriting. We’re modeling cost inflation conservatively in our value-add CapEx budgets and stress-testing renovation plans against a tighter labor market.
Rent Growth: Quietly Turning Positive
National rent growth re-entered positive territory entering 2025, with Class B and C product outperforming as renters trade down on affordability. Forecasts call for rents to rise modestly[3] through 2025 and accelerate into 2026 as supply contracts and absorption catches up. Sunbelt markets remain bifurcated—deeply oversupplied metros like Austin and Phoenix are still working through deliveries, while Midwest and Southeast secondary markets are tightening.
The signal we take from this is that the “rent growth” narrative needs to be underwritten at the submarket level, not the national level. We continue to focus on markets with durable employment growth, manageable supply, and structural affordability tailwinds—Louisville, Lexington, Birmingham, Charlotte, Greensboro, and Knoxville sit at the top of that list.
New Construction: A Slowdown That Helps Our Basis
Multifamily starts entered 2025 at the lowest level since 2012, with only roughly 230,000 units breaking ground in 2024 and the under-construction pipeline shrinking to its smallest reading since 2018. CBRE expects starts to fall by more than half in 2025[4] from the 2024 total, with most major markets having already passed their delivery peaks.
For our acquisitions strategy this means the supply overhang clears in 2026–2027 rather than at some indefinite point further out. We’re acquiring into a window where new deliveries are decelerating, financing for new construction remains restrictive, and replacement cost economics increasingly favor buying existing assets at meaningful discounts to build-new pricing. That dynamic is the underwriting backbone for several deals in our current pipeline.
Distress: The End of “Extend and Pretend”
The era of indefinite loan modifications is winding down. CRED iQ reported[5] that CMBS multifamily distress jumped 40 basis points to 12.9% in January 2025, up from 2.6% a year earlier. That’s a 12-year high and a clear signal that lenders are running out of room to delay resolution on maturing loans. Older assets with deferred maintenance and properties in stagnant rent-growth markets are showing the deepest stress.
The signal we take from this is that the next twelve months should generate the best off-market opportunity set of the cycle. We’ve been actively building relationships with special servicers, regional lenders, and brokers handling motivated sellers. Our disciplined underwriting—and the fact that we are pre-positioned with equity through the Oakdale GP Fund—means we can move quickly when the right asset comes loose at the right basis.
What’s New at Oakdale Capital
Chris Apostal joins as Partner and CIO. We are thrilled to announce that Chris Apostal has joined Oakdale Capital as Partner and Chief Investment Officer. Chris brings 17+ years of multifamily acquisitions, underwriting, due diligence, and investment strategy experience. He will be central to our continued growth and to deepening the rigor of our investment process.
Pipeline. Our acquisitions pipeline remains active across Louisville, Lexington, Birmingham, and Charlotte, with several value-add opportunities advancing through diligence. Demographic and employment fundamentals in these markets continue to compare favorably to deeper Sunbelt metros where supply pressure remains acute. Expect specific deal announcements in the coming weeks.
NMHC 2025 takeaways. Our team attended the NMHC Annual Meeting[6] in Las Vegas. The mood was the most optimistic in three years: significant dry powder on the sidelines, debt markets reopening (banks are back, construction loan terms more competitive), and renewed institutional interest in 1970s–1980s vintage value-add. Investors remain wary of regulatory overreach in LA, NYC, and San Francisco, but secondary and tertiary markets are quietly gaining attention.
The best opportunities of this cycle will be specific: fundamentally sound assets, pressured capital structures, disciplined basis, and business plans that don’t rely on rate cuts to work.
Oakdale GP Fund.
Our capital raise for the Oakdale GP Fund continues to advance. The Fund blends stabilized assets in low-volatility Midwestern markets with value-add opportunities in growth-oriented Southeastern markets, targeting attractive risk-adjusted returns through a structure that lets passive investors participate in GP-style upside. We welcome conversations with current and prospective investors.
Closing Thought
January reset the math on a lot of deals. The Fed isn’t coming to the rescue. Construction has slowed enough to matter. The distress wave is finally surfacing in the data. Sellers are recalibrating. And we have the team, the capital, and the underwriting discipline to act when the right opportunities clear the bid-ask gap.
As always, please reach out with any questions or to discuss what we’re seeing in our active markets.
Will Thompson
Founder & CEO, Oakdale Capital
Sources
CNBC, “Fed rate decision January 2025: Fed holds rates steady, takes less confident view on inflation,” January 29, 2025. cnbc.com
Trout CPA, “What a Second Trump Term Could Mean for Real Estate and Taxes,” 2025. troutcpa.com
Rental Housing Journal, “Rents Forecast to Rise in 2025 and 2026,” 2025. rentalhousingjournal.com
CBRE, “U.S. Real Estate Market Outlook 2025 — Multifamily,” 2025. cbre.com
CRED iQ, “Multifamily Distress Volumes Hit 12-Year High,” February 27, 2025. cred-iq.com
Investors Management Group, “NMHC Annual Meeting Recap: 2025 Industry Trends,” 2025. imgre.com
