Sunbelt Slowdown? Is the SFR Gold Rush Fading While Urban Multifamily Rises Again?
- Mitt Chen
- Jul 2
- 4 min read
Is the American dream of single-family rentals in the suburbs losing steam?
That’s what the latest data suggests—and investors who bet big on sprawling subdivisions in Phoenix, Jacksonville, and San Antonio may be feeling the temperature shift. 📉 Meanwhile, urban multifamily—the very asset class some declared “dead” during COVID—is staging a strategic comeback.
So what’s going on? Why is Sunbelt SFR cooling while urban apartments heat up? Is this cyclical… or structural? Let’s investigate. 🧐
Wait. Wasn’t the SFR Boom Supposed to Be Long-Term?
Yes, and for a while, it was. From 2020–2022, institutional capital flooded the Sunbelt. Cheap land, population inflows, low rates—SFR (single-family rental) portfolios were yielding 5–7% with strong appreciation. Everyone from Invitation Homes to Blackstone was all in.
Between 2019 and 2022, SFR home purchases by investors in Phoenix, Atlanta, and Charlotte surged over 80%. But 2024–2025? A different story.
🧊 Where’s the Cooldown Happening?
Here’s where the frostbite is setting in for SFR performance:
Market | 2024 Rent Growth YoY | 2024 Occupancy | YoY Price Change |
🏜️ Phoenix | -1.2% | 92.4% | -3.5% |
🌴 Tampa | +0.4% | 93.1% | -2.2% |
🐊 Jacksonville | -0.9% | 91.8% | -4.0% |
🌆 Charlotte | +1.1% | 94.3% | -1.8% |
🔗 RealPage Market Analytics, Q1 2025
The top SFR metros are seeing declining rents, increased concessions, and rising days-on-market. Why?
🤔 What’s Causing the Sunbelt SFR Softness?
1. Oversupply
A wave of build-to-rent (BTR) product hit the market in 2023–2024. Many secondary Sunbelt cities are now facing unit saturation, especially in outer-ring suburbs with few employment anchors.
🚧 As of Q1 2025, there are over 100,000 BTR units under construction nationwide, with the highest concentration in Arizona, Florida, and Texas.
2. Insurance & Tax Surges
In states like Florida and Texas, property insurance premiums have doubled since 2020, up 102% and 83% respectively. Add in rising property taxes, and SFR margins are being squeezed hard.
3. Softening Migration
Pandemic-fueled migration has cooled. U-Haul’s 2025 migration report shows a 12% YoY drop in net inbound moves to Florida and Arizona.
🚚 People are still moving, but more selectively, and often back to urban cores.
🏙️ So Why Is Urban Multifamily Bouncing Back?
A few reasons, starting with basic economics.
1. Affordability Crunch
High mortgage rates and inflation have priced out many would-be homeowners. Urban apartments are absorbing demand from sidelined buyers.
💡 Example: In Austin, the monthly cost to own a median home now exceeds renting by $900/month.
2. Return to Cities
Workforce reurbanization is real. Hybrid work has stabilized, and workers under 35 are moving back to urban neighborhoods for walkability, culture, and job access.
📍 NYC, Boston, Chicago, and even downtown LA have seen multifamily absorption rates hit post-2018 highs.
3. Global Capital Rotation
International investors are rotating back into core-plus urban multifamily. Why?
Dollar hedging
Regulatory clarity
Institutional-grade liquidity
According to MSCI Real Assets, urban multifamily cap rates compressed by 30bps on average in Q1 2025, while SFR cap rates expanded by 40bps.
💸 Where’s the Capital Flowing?
Asset Type | 2025 Institutional Flow YoY | Avg Cap Rate |
🏙️ Urban Multifamily | +18% | 4.9% |
🏠 SFR | -6% | 6.2% |
🏗️ Build-to-Rent | +9% | 5.7% |
📦 Industrial | +11% | 4.3% |
🧠 What’s notable: LPs still want housing exposure, but they’re picking their plays more selectively.
🔍 What Should Allocators Be Asking Now?
The old playbook: buy SFR in secondary Sunbelt markets and watch rents climb is outdated. The smart questions in 2025 are:
Are my SFR units insulated from regional supply shocks?
How sensitive are my margins to insurance and tax volatility?
Would urban multifamily give me better yield-risk tradeoff today?
Should I pivot to hybrid models (e.g., horizontal apartments, ADUs)?
Am I overweight the Sunbelt narrative and underweight gateway reinflation?
Because if you're managing LP capital or deploying your own, where you place your next dollar matters more than ever.
🧠 Mitt’s POV: What's the Move in Mid-2025?
I'm seeing smart allocators doing three things:
Trimming SFR exposure in oversupplied metros and rotating into Tier 2 infill locations with strong employment drivers.
Looking upstream: Partnering with developers of smaller urban multifamily (20–80 units) that are insulated from institutional bidding wars.
Exploring alternative rental housing: modular builds, co-living hybrids, and workforce housing with ESG upside.
And personally? I think a 6.2% SFR cap rate isn’t attractive if rent growth is flat and your insurance premiums just jumped 40%.
💥 So.. Is the Sunbelt Story Over?
No..but it’s evolving. The Sunbelt isn’t crashing. It’s normalizing. And like any gold rush, the first wave made money. The second wave., better be strategic.
🛑 No more buying blindly because it's “in Florida.” 🟢 Start underwriting deeper: renter demand, school scores, job drivers, cost of carry.
Urban multifamily? It's not sexy. But it is back and it’s getting the kind of institutional respect it hasn’t seen since 2019.
🏁 Final Takeaway:
SFR in the Sunbelt was the darling of 2021. Urban multifamily might be the comeback kid of 2025. Capital is adapting. Are you?
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