Wages Are Catching Up, the Sun Belt Is Catching Its Breath
Renter incomes are growing faster than rents for the first time in years, Q2 absorption hit a post-2021 high, and a wall of legacy maturities is finally pulling motivated sellers to the table. Here is what we are watching in mid-2025—and how we are positioning around it.
he first half of 2025 has produced a quieter, more constructive backdrop than most multifamily investors expected at the start of the year. Rents have not surged. They have not collapsed. Instead, the underlying composition of the market is shifting in ways that matter for how we underwrite. Affordability is improving. Demand is showing up where it should. And the financing pressure on prior-cycle buyers is starting to translate into a real opportunity set for patient capital.
Wages Are Finally Outpacing Rents
For most of the post-pandemic period, rent growth ran well ahead of income growth. That has flipped. Redfin reports wages are up 4.1% year over year[1], ahead of asking rent growth of roughly 2.6% and a much smaller 0.2% in mortgage payments. RealPage notes the same dynamic[2]: median rent-to-income ratios have drifted back toward pre-pandemic norms, with several major metros now sitting below the 21% threshold that historically signals healthy affordability.
This matters for our underwriting because it removes one of the key tail risks in the cycle. A renter base that can absorb modest annual rent increases without breaking is the precondition for stable occupancy and durable NOI growth. It also tells us that the very thin trailing rent-growth print at the national level is a supply story, not a demand story—an important distinction when sizing risk on a deal-by-deal basis.
Q2 Demand Was the Strongest Since 2021
U.S. apartment demand snapped back in Q2. RealPage reported net absorption of more than 227,000 units in the quarter[3], the strongest second-quarter result since the 2021 leasing boom, and trailing-twelve-month absorption of roughly 794,000 units—the highest annual reading on record. National occupancy reached 95.6% in June, up 140 basis points year over year.
The geography of that demand is what stood out to us. Dallas–Fort Worth alone absorbed nearly 10,000 units. Atlanta, Jacksonville, and the broader Carolinas region all posted unusually large absorption gains, with the Carolinas pulling in roughly 69,200 units over the trailing year—close to 7% of regional inventory. Chicago and other Midwest metros, with far less new supply to digest, continued to deliver mid-single-digit annual rent growth.
The slowdown in Sun Belt rents is a supply problem, not a demand problem. People are still moving in. They are just walking into a market where developers got there first.
The signal we take from this is that the Sun Belt thesis is intact, but the entry point matters more than it did three years ago. Demand is real. Supply is the variable. That favors submarkets where the development pipeline has thinned and disfavors the few metros—Austin, parts of Phoenix—where deliveries are still well above absorption.
The Sun Belt Is Not “Done.” It Is Digesting.
The narrative that the Sun Belt has structurally peaked is, in our view, conflating two different things. Rent concessions in Austin and Phoenix are real, but they are the byproduct of an unprecedented 2021–2024 construction wave finally landing in the same calendar years. National apartment deliveries are projected to fall roughly 25% in 2025 versus 2024[4], with the largest pullbacks concentrated in the same overbuilt metros that now show negative rent growth.
Population growth, job formation, and household formation in Texas, Florida, and the Carolinas remain well above the national average, and homeownership remains structurally out of reach for a meaningful share of the working-age population. As the supply wave clears, we expect rent growth in the Sun Belt to recover faster than the headline narrative suggests. The acquisitions strategy this implies is straightforward: identify the assets where today’s concessions are the result of a finite cohort of nearby lease-ups, not a deteriorating renter base.
The Maturity Wall Is Pulling Sellers to the Table
The clearest opportunity in 2025 is sitting on the debt side of the capital stack. More than $650 billion in U.S. multifamily mortgages is scheduled to mature between 2024 and 2026[5], most of it originated at 3–4% coupons that cannot be refinanced at par today. Trepp data referenced by multiple industry sources points to roughly $35 billion of those maturing loans already running with debt service coverage below 1.20x—the threshold where lenders typically require an equity infusion or a sale.
Capital is positioning for this. PGIM Real Estate and Citymark Capital launched a $500 million joint venture[6] specifically to acquire performing and non-performing multifamily loans, and the broader institutional community has been raising parallel vehicles all year. The volume of stress is large enough that it will not clear through workouts alone.
The most attractive entry points over the next eighteen months will not be on assets that have failed. They will be on assets that simply outgrew their capital structure.
For our acquisitions strategy this means concentrating diligence on assets where the real estate is sound but the original capital structure no longer fits. These transactions price off basis and current-cash-flow math, not 2021 comps, and they are the deals most likely to clear in a market where buyers and sellers still disagree on cap rates.
Transactions Are Thawing, Slowly
Volume has not yet caught up to the opportunity set, but the direction is clear. Newmark reported Q1 2025 multifamily sales volume of $30.0 billion, up 35.5% year over year[7], with trailing-twelve-month volume of $157.7 billion. Multifamily remained the most active commercial real estate sector by dollar volume.
The bid-ask gap is the binding constraint. Sellers anchored to 2021 valuations are gradually adjusting; buyers are gradually rebuilding conviction at today’s debt costs. As loan maturities force the issue, that gap should continue to close. We are underwriting accordingly—assuming the next eighteen months produce a steady, rather than explosive, recovery in transaction activity, with the cleanest opportunities concentrated where the capital-structure pressure is highest and the underlying real estate is least impaired.
Closing Thought
The July picture is one of a market regaining its footing. Renters can afford the product. Demand is strong where supply has cleared. The capital-markets logjam is starting to break, and the sellers most likely to transact in the next twelve months are the ones most likely to produce attractive entry points for disciplined buyers.
Our approach has not changed. We underwrite to today’s rates, not theoretical future cuts. We prioritize markets with durable demand and a visible end to the local supply pipeline. We focus on assets where stress is capital-structure driven rather than fundamentals-driven. And we treat basis discipline as the primary driver of returns through the rest of this cycle.
As always, please reach out with questions or to discuss what we are seeing in our active markets.
Will Thompson
Founder & CEO, Oakdale Capital
Sources
Redfin, “Wages Are Growing Faster Than Rents and Mortgage Payments,” 2025. redfin.com
RealPage Analytics, “Wages are Outpacing Rent Growth,” 2025. realpage.com
RealPage, “RealPage Second Quarter Analysis Forecasts Continued Strong Apartment Demand,” July 22, 2025. realpage.com
RealPage Analytics, “2nd Quarter 2025 Multifamily Update,” 2025. realpage.com
PGIM Real Estate, “PGIM Real Estate and Citymark Capital announce $500M joint venture to acquire multifamily notes,” October 22, 2024. pgim.com
Multifamily Dive, “PGIM, Citymark enter JV to buy debt,” October 2024. multifamilydive.com
Newmark, “United States Multifamily Capital Markets Report,” Q1 2025. nmrk.com
