Shaina Mishkin

Forget about apartment dwellers swimming in rental options and the newly elected New York mayor who promises affordable housing. Investors in companies operating rental properties are focused on how a softening job market will affect prices.

The hope for investors in multifamily real estate income trusts, or REITs, earlier this year was that rents would increase as the apartment glut came to an end. The number of multifamily units hitting the market has, indeed, slowed significantly from last year's pace, according to August's Census data, the most recent release.

Yet residential REITs' bad year has continued, with a group of six of the space's multifamily stocks down an average of 17% this year. Asking rents measured by Zillow have cooled, with modest growth expected nationally in the coming year.

New supply isn't quite as much of a problem as it was in the past, says Steve Sakwa, a senior equity research analyst covering REITs at Evercore. Apartment deliveries have slowed from 2024 and are expected to slow further in 2026, he notes.

And REITs with a concentration of their portfolios in New York City are unlikely to see a huge impact to their operations following the election of democratic socialist Zohran Mamdani -- who campaigned to "freeze the rent." That's because public REITs that operate in New York have a relatively small share of rent stabilized units, Sakwa notes -- though changes to quality of life in the city could impact the rental market.

Employment is now the biggest concern, Sakwa says. "If you just have to watch one thing, it's job growth," Sakwa says. "It is paramount to the multifamily industry." Job loss creates apartment openings as unemployed workers vacate, leading to lower rent. That deal attracts tenants from more expensive units, and the cycle repeats. "It can be a little bit of a cascading down effect as the market softens," he says.

Residential REIT executives on recent earnings calls attributed a weakening in demand to employment concerns.

"Apartment demand has been softer than anticipated this year, which we attribute mainly to the reduced job growth backdrop, with related factors including higher macroeconomic uncertainty, lower consumer confidence, and a reduction in government hiring and funding," AvalonBay Communities CEO Benjamin Schall said on an October conference call after the company missed FactSet consensus estimates for funds from operations in the third quarter. The stock is down about 19% this year.

The residential REIT Mid-America Apartment Communities lowered its expectations for same-store rent growth "primarily due to the lower recovery trajectory on new lease rents as the broader economy and employment markets moderated over the summer months," CFO A. Clay Holder said on the company's recent earnings call. The stock is roughly 16% lower this year.

It's a familiar theme for anyone watching the housing market this year. High housing costs have long put a damper on sales. On the for-sale side, homeowners staying put longer than they might otherwise, resulting in a lack of availability that has helped keep home prices firm and push the median age of the first-time home buyer to 40 this year.

But buyer hesitancy spurred by economic uncertainty and job market concerns isn't helping. A quarter of respondents to Fannie Mae's September housing market sentiment survey said they were concerned about job loss over the next 12 months, higher than the survey average of 18%.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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November 09, 2025 02:15 ET (07:15 GMT)

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