Blog: Rent or buy? Trends Point to Outlook for Multifamily Investing


Mortgage interest rates, housing starts, home prices, rent and inflation are all on the upswing. Will consumers find it more attractive in the future to rent or buy? For investment advisors and investors, the answer provides context for a decision to diversify traditional portfolios through multifamily investing. As investors stress test their portfolios and seek higher total returns, multifamily investments can provide a true “alternative” in this regard. But to understand why, it pays to look at the situation from the perspective of prospective tenants and home buyers.   


The median home price grew by 34% from March 2020 to March 2022, according to Redfin, and Zillow expects annual home prices to soar another 17.3% by January 2023. The National Association of Realtors (NAR) reported that the median home price climbed 13.4% in just the past year, the highest jump since record-keeping began in 1999. In June, the median sale price of an existing home reached a record $416,000, the NAR reported. Despite these hefty price increases, annual existing home sales reached a 15-year high in 2021.     


Renters asking the “rent or buy” question face other hurdles. One is competition for homes from investors and second-home buyers, who accounted for 1 in 6 sales in the NAR yearend report. Another is rising mortgage rates. Interest rates on 30-year mortgages are hovering in the 5% range for the first time since 2010. Even though wages are climbing, rising mortgage interest rates mean the monthly payment on the median house now claims close to one-fourth of the median income. In the Western U.S., it’s well over one-third of income. Families are finding it harder to raise cash for a down payment, with 2 out of 3 U.S. consumers tapping into savings for living expenses.

Gap Between Homeowners and Renters is Shrinking 

The pandemic may have touched off higher interest rates and inflation, but the economic response to COVID-19 accelerated longstanding housing trends. It also eroded homeownership as a goal. Across age demographics, lifestyle changes now favor the rental market. Millennials face high student debt; they’re still interested in homeownership, just not anytime soon. Gen Z renters have less available net worth for a home purchase, and older adults have few accessible housing choices. For them, the rent or buy options are limited. 


While owning a home has long been part of the American dream, U.S. Census Bureau statistics show homeownership declined to 65.5% at the end of 2021, down from 69% in 2004. The Urban Institute expects the rate to fall to 62% by 2040. While there are more homeowners than renters, the gap between them is shrinking as housing costs continue to climb, a July 2022 analysis by iPropertyManagement showed. All age groups are experiencing a decline in homeownership. But those 35 and under had the largest year-over-year decline, the analysis noted. 

 

While millennials, the nation’s largest population cohort, want to buy homes, they don’t have the resources yet. And they may not anytime soon given that home price growth rates are even higher than rent price growth rates, and mortgage rates and financing costs are up 60% year over year, GlobeSt reported in June.   


In July 2022, Zumper’s National Rent Index reached an all-time high, with the median rent on a one-bedroom apartment rising 11.3% year over year to $1,450. Two-bedrooms rose 9.3% year over year. But the house that two years ago would have sold for $300,000 now costs $420,000, with a mortgage that’s risen from 3% to 5.5%. The combination adds $1,000 to the monthly payment. 

As Rent Rises, So Does Cost of Homeownership 

Redfin’s U.S. database suggests how the rent or buy dynamic plays out. The average U.S. monthly rent was $2,016 in June 2022, up $249, or 14%, year over year. With a 5% down payment, Redfin finds the average condo or co-op loan would be $185 cheaper while the average single-family mortgage would be $418 above the average rental rate. Still, property taxes and homeowners’ association fees or home maintenance outlays would push monthly costs much higher.

 

These numbers make millions of renters a captive rental audience, unable to buy even if willing. Plus, home prices are rising faster than incomes. In NAR’s affordability model, qualifying income for the median single-family home with 20% down is more than $88,000. By those standards, many millennials don’t have the income to buy, while Gen Z renters lack the savings. The number of first-time home buyers fell to 37% in 2021 from 43% in 2020 and may not top 45% until after 2030, according to two Zillow reports.


An economic slowdown is unlikely to close the affordability gap. While recession might bring interest rates to heel, unemployment would leave fewer wage-earners to benefit. In housing cycles, home prices are fast to rise but slow to fall. As interest rates fall, real estate market demand rises, keeping prices high.

Multifamily Real Estate Investment Expected to Climb

A 2022 survey of advisors uncovered a “Goldilocks moment” for alternative investments: Allocations to private real estate and other alternatives had risen to 14.5% of assets, with plans to increase that to 17.5% in the next two years. The results mirror European trends: The London-based AssetTribe platform estimated demand for alternatives to rise as much as 46% in the in the next year. Real estate was the most popular alternative investment, attracting 3 of 4 European Union and United Kingdom investors surveyed. Overall, multifamily investment volume in 1Q 2022 rose 56% year over year, with CBRE tracking a record $63 billion quarter. Investment in the sector totaled 37% of all commercial real estate investment.   



Neither economic headwinds nor coronavirus disruptions have dislodged high multifamily real estate valuations. In its multifamily real estate outlook, Fannie Mae expected above-average demand both in the next few months and as new Class A buildings are completed in 2023. iPropertyManagement’s analysis of industry data found rental demand will climb over the next five years.


Bottom line: Trends indicate that strong rental demand is likely to persist for years. That forecast should encourage continued multifamily investment.

Building to Hold vs Building to Sell

By Christian O'Neal • July 31, 2025
Why Building and Holding Real Estate for the Long- Term Delivers Superior, Tax-Efficient Yield 

Rent Control - Does it Work?

By Christian O'Neal • July 31, 2025
Rent Control: A Well-Intentioned Policy That Misses the Mark In the debate over affordable housing, few policies stir as much emotion—or controversy—as rent control. Advocates see it as a way to shield tenants from rising rents. Critics argue it does more harm than good. When you examine the economic evidence and real- world outcomes, the conclusion becomes clear: rent control is a deeply flawed solution to a real problem. What Is Rent Control? Rent control is a policy that limits how much landlords can increase rent, either through caps tied to inflation or fixed annual percentages. On paper, it sounds compassionate: protect renters from displacement and make cities more affordable. But in practice, rent control reduces the supply of available housing, discourages new development, and often hurts the very people it's meant to help. Why Rent Control Backfires 1. It Discourages New Construction Developers are less likely to build in markets where future rent growth—and thus returns—are capped. Why take the risk of developing multifamily housing in a city where your upside is limited and your operating environment is politicized? 2. It Drives Property Owners Out of the Market Faced with strict rent regulations, landlords may convert rental units to condos or remove them from the market altogether. Fewer units mean more scarcity, which ultimately drives prices higher for everyone else. 3. It Distorts Housing Allocation Rent control encourages long-term tenants to stay in apartments they might otherwise outgrow or vacate. This locks up valuable housing stock and prevents more dynamic turnover, often freezing lower-cost units in place for higher-income tenants. 4. It Creates a Two-Tiered Market Markets with rent control often develop into two separate ecosystems: regulated apartments that are underpriced and hard to find, and unregulated units with inflated prices to compensate for suppressed supply. The California–New York Split: A Tale of Two Approaches Historically, California and New York have been peers in over-regulating rental housing. But recently, they’ve taken different paths: California's Recent Steps Forward:  Voters rejected rent control expansion (Prop 21 and earlier Prop 10)  Streamlined approvals and reduced CEQA abuse to promote new development New York's Recent Moves Backward:  Passed “Good Cause Eviction” law—effectively rent control in disguise  Political calls for rent freezes and demonization of landlords If you’re an open-minded apartment developer evaluating both markets today, California’s message is increasingly: We need you. New York’s? Not so much. To be fair, both are still difficult places to build housing, and cities like Los Angeles and Berkeley remain deeply anti-development. But California has shown progress by recognizing that you can’t claim to be pro-housing while simultaneously vilifying those who create and operate it. A Misalignment of Incentives A core problem with rent control is that it treats housing supply as fixed and ignores the private sector's role in expanding it. If developers and operators are stripped of potential upside—and burdened with unpredictable political risk—they simply stop building. Even well-intentioned pro-development plans (like NYC’s "City oare undermined when operators believe they’ll be punished after delivery through hostile regulation or public scorn. You can't be truly pro-development unless you're also pro-operator. Policies that foster collaboration, not scapegoating, create the conditions for long-term affordability. The Real Way Forward Instead of imposing artificial caps, cities should focus on increasing housing supply through zoning reform, expedited approvals, and public-private partnerships. The more units that come online, the more pricing power shifts away from landlords and toward tenants—naturally. Rent control is seductive in its simplicity but devastating in its consequences. It’s a policy that tries to solve a supply problem with demand-side restrictions—and in doing so, it often makes things worse. At Alpha Equity Group, we believe that smart, sustainable development is the key to housing affordability. And that requires sound economics, not political theater.

Into the Future – Making Sense of Rates in a World That Doesn’t

By Christian O'Neal • June 24, 2025
In the world of capital markets, clarity is often fleeting — and today, it feels downright elusive. The Federal Reserve’s latest June dot plot offered little in the way of certainty. While the median projection sees the Federal Funds Rate in the mid-3% range by the end of 2026 , the dispersion among voting members is striking. Seven members predict no rate cuts in 2024 , reflecting just how divided the committee remains in the face of conflicting data. This latest update marks a 25-50 basis point shift downward from May , but the overarching theme is one of caution, not conviction. That sentiment is mirrored in the economic projections. Core PCE inflation , the Fed’s preferred inflation measure, is now expected to end 2025 at 3.0% , 30 basis points higher than earlier forecasts. Meanwhile, real GDP is forecast to slow from 2.3% in Q4 2024 to just 1.7% in 2025 — another sign that the lagged effects of monetary policy are expected to begin to show. At the same time, the Fed’s balance sheet has shrunk dramatically, from a peak of $9 trillion in April 2022 to just $2.3 trillion today . That quantitative tightening, coupled with a lack of consistent inflation suppression, leaves both equity and bond markets vulnerable to further volatility. This all feeds into an uncomfortable truth: rates are likely to remain higher for longer , and the market is struggling to price that reality. The VIX index , a 30-day forward-looking gauge of volatility in equities, is trending higher. When volatility rises even as indices fall, credit spreads widen , liquidity tightens, and financing risk surges. For commercial real estate investors , this has enormous implications. As we explored in our recent article on CRE Price Discovery , the market remains in flux. The bid-ask spread in real estate is still somewhat wide, and most transaction activity today is being driven by maturing debt — not opportunistic investments banking on future growth. This means valuations are being forced downward, especially for assets that were purchased or refinanced at ultra-low rates in 2021–2022. Consumer behavior is also in transition. Household formation is slowing, and personal savings rates are slowly ticking up although they are significantly down from longer term averages – which could reflect folks bracing for economic turbulence. U.S. household formation currently stands at 1.058 million, down 7.68% from last month’s 1.146 million and down 47.73% from 2.024 million a year ago. Looking globally, demand for U.S. Treasuries remains a critical economic indicator that has trickling effects on the economy . A strong bid-to-cover ratio — like the 2.67x seen at the June 11th 10-Year Treasury auction , with nearly 88% of bids from foreign banks — is encouraging. It suggests continued faith in U.S. fiscal credibility and currency strength despite market apprehensions in our strength, such as the US credit rating being downgraded by Moody’s. This equilibrium is rather fragile. Should the U.S. continue to run massive budget deficits with a debt-to-GDP ratio north of 120% , investors may begin to demand higher yields — or worse, seek refuge in alternative stores of value. Gold is one such store. The World Gold Council recently reported that 76% of central banks expect to increase their gold holdings over the next five years , up from 69% in 2023. This flight to real assets reflects growing concern about the long-term value of fiat currencies — and a desire to hedge against systemic risk. The Bottom Line  Rates are likely to remain high through 2025 and into 2026 Inflation remains persistent but progress has been unclear Growth is slowing, and volatility is rising Real estate is repricing around debt maturity events Global capital is shifting cautiously, looking for safety At Alpha Equity Group, we believe this is a time for discipline, not risk-taking. We’re staying patient, watching the data, and investing defensively — focusing on secured debt positions and capital preservation. While others chase uncertain upside, we’re building long-term value through downside protection while we wait out the convergence of dozens of factors completely outside our control.
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