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.

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Trump Restricts Institutional SFR Ownership: Now What?

By Christian O'Neal • January 29, 2026

Would a Ban on Institutional SFR Ownership Actually Improve U.S. Housing Affordability? Proposals to restrict or ban institutional investors from purchasing single family homes have reentered the public conversation. The political narrative is simple and emotionally resonant. Large investors are blamed for crowding out everyday buyers, pushing prices higher, and worsening affordability. When examined through the lens of capital flows, liquidity, and housing supply, however, the economic impact of such a policy appears far more limited than advertised. At a national level, restricting institutional ownership would likely have minimal effect on affordability and could introduce unintended distortions across adjacent housing sectors. The United States has roughly 85 million single family homes. Institutional investors own only a small fraction of that total. The two largest publicly traded single family rental platforms together control approximately 150,000 homes, representing less than two tenths of one percent of national inventory. Even when expanding the definition to include private equity platforms, pension backed vehicles, and insurance capital, institutional ownership remains concentrated in a narrow set of metropolitan areas. Outside of select Sunbelt markets such as Austin or Charlotte, institutional investors account for a minimal share of single family rental stock. Housing prices are shaped locally, not nationally. Still, national affordability outcomes cannot meaningfully change when policy targets a participant that operates at the margins of total supply. At any given time, roughly three to six million homes are listed for sale across the country. Even under an extreme assumption where all institutional owners liquidated simultaneously, those homes would represent only a modest share of available listings. Any resulting price impact would likely be temporary and geographically concentrated. In practice, even markets with higher institutional presence such as Charlotte, Phoenix, Dallas, Austin, or Tampa would likely see only modest declines, perhaps five to ten percent at most. That assumes perfect coordination and no offsetting demand, both of which are unrealistic. Housing markets function on liquidity. Buyers and sellers must be willing to transact. Capital must be available at reasonable terms. When liquidity declines, volatility increases and pricing becomes less stable. Institutional investors, regardless of public perception, provide consistent liquidity. They transact through cycles. They underwrite based on yield rather than emotion. They often absorb inventory during periods when individual buyers pull back. Restricting institutional participation does not remove capital from the system. It alters the market’s risk profile. Reduced liquidity leads to wider bid ask spreads, higher perceived risk, and a higher cost of capital for builders and developers. That higher cost does not disappear. It is ultimately passed through in the form of higher rents, higher home prices, or reduced construction activity. If institutional buyers are restricted from acquiring scattered site single family homes, capital will not sit idle. It will migrate toward structures that remain permissible and scalable. Stabilized rental portfolios become more attractive. Purpose built rental communities draw increased attention. Multifamily assets with single family characteristics absorb additional demand. This redirection of capital would likely push valuations higher in these segments. A policy designed to curb investor influence in one part of the market may unintentionally inflate prices in others. Build for rent communities are particularly well positioned in this scenario. They offer operational efficiency, regulatory clarity, and institutional scale. As competition increases, yields compress and replacement costs rise, making new housing more expensive to deliver. In this way, a ban could create a construction drag by shifting capital away from for sale housing while simultaneously increasing the cost of producing new rental supply. The most powerful force restricting housing supply today is mortgage lock in. Roughly eighty percent of homeowners hold mortgages at four percent or lower, with many locked near three percent. At current borrowing costs, selling often means doubling monthly debt service. Even households looking to downsize face higher payments. As a result, existing owners choose not to sell. This dynamic has dramatically reduced resale inventory and supported prices despite affordability challenges. Restricting institutional buyers does nothing to address this structural bottleneck. One of the most effective demand side interventions would be the widespread adoption of transferable or assumable mortgages. Allowing buyers to inherit existing low rate debt would unlock supply, improve transaction volume, and relieve pricing pressure without distorting capital flows. Rents respond to household formation, supply growth, and replacement cost. They do not decline simply because ownership changes hands. If institutional ownership is restricted while new supply remains constrained, rents are unlikely to fall. In many markets, rents could rise modestly as higher capital costs are passed through and professional operators retreat. Without a material increase in housing units, rental affordability remains challenged. A realistic forecast points to limited national impact. Certain markets with high institutional concentration may experience short term volatility, but any adjustment is likely to be measured rather than dramatic. At the same time, sectors absorbing displaced capital such as build for rent communities or stabilized rental portfolios could see upward pricing pressure. Home prices ultimately reflect supply relative to household demand. Policies that fail to materially increase supply rarely generate sustained price relief. For those building housing products, the signal is clear. Long term affordability is driven by supply creation, not ownership restrictions. New housing of all forms remains structurally undersupplied. Projects that deliver density, efficiency, and speed to market will remain advantaged. Build for rent and purpose built rental communities are likely beneficiaries of redirected capital. Development strategies should anticipate rising land values and stronger institutional exit demand in these segments. Ownership enabling products deserve renewed focus. Structures that help households access low cost debt or transition from renting to owning align more closely with the true constraints of the market. Capital efficient design will matter more than ever. Smaller units, higher density, modular construction, and flexible zoning strategies offer resilience in an environment where the cost of capital remains elevated. A ban on institutional single family home ownership may satisfy a political narrative, but it does little to address the core mechanics of housing affordability. Institutional investors own too small a share of the market to move national outcomes. Liquidity would decline. Capital would reallocate. Supply constraints would persist. Without policies that unlock mobility, expand supply, and reduce financing friction, affordability challenges will remain largely unchanged. For developers and operators, the opportunity lies not in reacting to headlines, but in building the housing the market structurally lacks. And that is exactly what we at Alpha Equity Group are doing, very carefully, while providing investors with peace of mind through downside protected investments.