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Is every asset class in a bubble?
Whether you think so or not, the fears are all too plausible. Despite the longest government shutdown in history, reheating inflation, continuing tariff fears, a weakening labor market, and fraying geopolitical ties, the S&P 500 just recently notched a record high and remains close to it as I write this. The index has soared 19.6% over the last year.
Big tech and artificial intelligence (AI) stocks look particularly bubblicious. Nvidia’s stock has skyrocketed 416% over the last two years, and the industry keeps announcing circular deals among the same few companies.
Then there’s gold, up over 102% over the last two years, more than doubling its prior record. And that’s supposed to be the safe-haven asset.
Even single-family home prices (averaging around $364K) continue hovering near record highs (~$366K) from earlier in the year. That comes in the face of a supply surge, longer days on market, and weakening income growth compared to inflation.
As for cryptocurrencies, which run on pure speculation, the word “bubble” is never far from investors’ lips.
Yet I can think of at least one asset class that isn’t in a bubble: multifamily real estate.
Multifamily’s Bubble Already Burst
There was a bubble in multifamily real estate in 2020-2022—and it burst.
Over the two years from the second quarter of 2022 to the second quarter of 2024, the Fed’s Multi-Family Real Estate Apartment Price Index fell 25.2%. That’s not a correction; it’s a crash. No, worse than a crash: a bear market.
When single-family home prices fell a similar amount in the Great Recession, people panicked. But the multifamily collapse barely made the news outside financial circles, because so few Americans own an interest in multifamily properties.
Prices reached a bottom in the second quarter of 2024, and over the next year rose 5.5% (the most recent data available). Freddie Mac’s Apartment Investment Market Index shows 7.6% growth over the last year.
(embed graph from: https://mf.freddiemac.com/aimi)
Look at multifamily prices (the blue line) versus net operating incomes (the orange line), leading up to the Financial Crisis. They diverge far apart, then converge closer together after the correction. That’s the same pattern that is playing out right now.
Multifamily prices and NOI haven’t been this close together since 2012, creating a bargain for investors. “We’re seeing a healthier equilibrium between income and valuations,” real estate investor Austin Glanzer of 717HomeBuyers told BiggerPockets. “For long-term investors, this looks like a rare asset where you’re buying after the bubble, not before it.”
Opportunities for Distressed Sales
Far too many operators overpaid in the bubble of 2020-2022, and bought with floating interest bridge loans. Those loans have been coming due, or driving cash flows underwater, and it’s forcing many operators to sell at a steep loss.
As a real estate investor, you know the best bargains come from distressed sales. I don’t need to belabor the point.
I will say that I have seen this firsthand in our co-investing club. We’ve invested in multifamily properties over the last six months, when the operator bought the property at a huge discount because it was in foreclosure.
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Why Multifamily Is Poised for a Rebound
Multifamily real estate has had a rough few years, while stocks, gold, crypto, and single-family homes kept soaring.
That’s precisely why multifamily is poised for recovery. Developers have pulled back on building permits in multifamily. Redfin reports a 23% drop since the pandemic peak in apartment building permits over the last year. With less new supply hitting the market, rents will likely resume their upward march after stalling in much of the country over the last year. Concessions will likely ease, and NOIs will rise.
People need a place to live, after all. And reduced new supply will help drive values higher.
Options for Investing in Multifamily
You could buy an apartment complex by yourself, of course. But most of us don’t have $10 million just sitting around collecting dust.
Alternatively, you can buy shares in REITs. On the plus side, you can buy shares with small amounts, and they’re liquid. But the problem with REITs is that they share too close a correlation with the stock market at large, which defeats the purpose of diversifying into real estate.
You could also invest in multifamily real estate syndications, which come with their own pros and cons. The greatest downside: They come with a huge minimum investment ($50,000 to $100,000).
If you invest by yourself, that is. Personally, I invest as a member of a co-investing club, where we meet on Zoom every month to vet a new passive real estate investment. We can each go in with $5,000 or more if we like that particular investment. Best of all, we get the benefit of each other’s expertise in vetting the risk together.
Lastly, you can invest in private equity real estate funds. Most don’t allow non-accredited investors, however.
Where Is Multifamily Headed?
The multifamily market is finally stabilizing after sharp swings during and after the pandemic.
In the pandemic, eviction moratoriums effectively froze rents at artificially low levels. When moratoriums lifted, the rubber band released, and rents shot upward. They rose too far, too fast in many markets, even as construction of new apartment buildings flooded those same markets with supply.
In the last 18 months, rents cooled and even dropped in many markets—a rare occurrence. Rents are now entering their winter rest period, poised for stronger growth in 2026. “Rent growth is normalizing after a post-pandemic whipsaw, expense pressures have begun to stabilize, and construction starts have slowed to pre-pandemic levels,” real estate investor Oren Sofrin of Eagle Cash Buyers told BiggerPockets.
Personally, I don’t time the market. I practice dollar-cost averaging with my real estate investments: investing $5,000 a month, every month, through the co-investing club.
But when people ask my opinion on the multifamily market right now, I actually think it’s one of the few asset classes that looks like a bargain. Sofrin agrees: “From a risk-adjusted standpoint, multifamily may be one of the few corners of real estate where future appreciation potential exceeds embedded downside risk.”
