As we’re nearing the end of Q2, the real estate market is navigating a delicate balance of economic forces. Tariffs, interest rates, constrained supply, and shifting buyer-seller dynamics are all playing critical roles. At Rise48, we’ve been closely monitoring these trends and adjusting our strategies to remain both resilient and opportunistic.
Below is an update on the market our approach.
Tariffs are back in focus, but we’re prepared
The return of elevated tariffs in 2025 has impacted businesses across nearly every sector. For real estate operators, this primarily affects construction materials, renovation timelines, and overall project costs. Anticipating this challenge, we made early strategic moves to protect our supply chain:
- Supplier Diversification: We currently work with two primary suppliers: One that produces the majority of materials here in the U.S., and another that sources from Vietnam and China.
- Preemptive Stockpiling: Our international supplier built up significant inventory for us ahead of the tariff increases, ensuring continuity in our renovation timelines and cost controls.
- Domestic Manufacturing Relationships: Our U.S.-based supplier gives us additional insulation from international policy shifts and helps keep our materials pipeline stable.
As a result, while many operators are now scrambling to adjust to higher costs, we’re operating from a position of strength and stability.
Interest Rates: Less Relief Than Expected, But Opportunities Remain
Over the past few years, there was widespread hope that interest rate cuts would arrive more quickly. But the Federal Reserve has remained cautious. Since the first rate cut in September 2024, we haven’t seen much additional movement and Fed Chair Jerome Powell has made it clear that decisions will be entirely data-driven. (Market Watch)
Here are a few insights:
- Inflation appears to be softening, with recent CPI and core inflation numbers coming in below forecasts.
- The ADP jobs report came in weaker than expected, which may indicate a cooling labor market, something the Fed watches closely. (Market Watch)
- No imminent rate cuts are expected, but the door is open for action in the second half of 2025 if the data continues to soften.
While high rates present challenges, they’re also extending a rare acquisition window. Sellers facing debt maturities are under pressure to transact, often at a loss, providing unique opportunities for well-capitalized buyers.
The Distress Cycle Is Still Playing Out Occupancy
We are still in a prolonged cycle of distress-driven sales. Many of the deals we’re pursuing come from two categories:
- Loan Maturity-Driven Sales: Owners whose floating-rate debt is maturing in the near term are being forced to sell, even if it means realizing a loss.
- Legacy Owners with Long-Term Equity: Some sellers have held their properties for 15–25 years. With a low basis and significant equity, they’re willing to exit at today’s prices, which often creates strong upside for the next buyer.
While these opportunities aren’t easy to find, they do exist and we’ve been able to capitalize on them with disciplined underwriting and quick execution.
Why That Matters: Rent Growth and Investor Positioning
In 2023 and 2024, we saw negative rent growth in Phoenix for the first time in over a decade. The reason? A surge of new housing came online at once, outpacing demand and forcing operators to offer concessions. (The Home Front)
But with new construction slowing dramatically, that oversupply is being absorbed and rent growth is expected to return.
Yardi Matrix and other major forecasting platforms project positive organic rent growth across major Sunbelt metros in 2025, 2026, and beyond. This trend, combined with lower concessions and improving occupancy, creates a powerful setup for long-term investors.
Supply Dynamics Are Creating Long-Term Tailwinds
One of the most important trends we’re watching is the rapidly shrinking supply of new apartment units across key Sunbelt markets. Our focus is on Phoenix, Dallas-Fort Worth, and North Carolina—specifically Charlotte, Raleigh-Durham, and Greensboro—and all three are showing similar patterns.
New apartment deliveries are expected to decline sharply in the second half of 2025, with an even steeper drop projected for 2026. This stems from the fact that construction starts have been minimal since late 2022, when rising interest rates rendered many development projects financially unviable. Meanwhile, population and job growth remain strong, particularly in these business-friendly, high-in-migration areas. The result is a growing mismatch between housing demand and available supply, a trend we believe will have major implications in the coming years.
Cap rates are stable, so the real play is distress
Contrary to popular belief, cap rates haven’t significantly expanded in the past 12–18 months. In many cases, pricing remains flat. So, we’re not necessarily seeing “cheaper deals”, we’re seeing better terms from motivated sellers.
The opportunities we’re targeting tend to fall into a few key categories: sellers facing loan maturities who need to exit, long-time owners looking to cash out after decades of ownership, and properties with untapped value due to operational inefficiencies or mismanagement.
What to expect over the next 6–12 months
We expect transaction volume to increase in the next year, driven by:
- Continued supply absorption
- Interest rate adjustments (even modest ones)
- Sellers capitulating to current market realities
And with construction activity still well below replacement levels, the supply-demand imbalance will only deepen especially in fast-growing metros.
Our Operational Focus for the Rest of 2025
As always, operations are front and center. Our current portfolio is benefiting from:
- Stricter resident screening (income, credit, and background checks)
- Refined leasing strategies to manage concessions and maximize occupancy
- Continued asset optimization to drive NOI growth
While we’re actively acquiring, we’re just as committed to dialing in performance across every existing asset.
Want to Partner with Rise48 Equity?
While the market may seem uncertain, we are confident in our ability to expand our footprint, provide our investors with new investment opportunities and renovate our properties to elevate resident living.
If you’re interested in multifamily investing or have questions about how you can get started, schedule a call with our team.
