Multifamily State of the Market: "The 2018 Echo: Why Texas Multifamily is ‘Coming Back Like Gangbusters’"
Q4'25 State of the Market: "The 2018 Echo: Why Texas Multifamily is ‘Coming Back Like Gangbusters’"
Written by SPI Co-Founder & Principal, Michael Becker
Q4 2025 Newsletter
Hi, Michael Becker Here...
As we close out 2025, the pendulum of investor sentiment in Texas is swinging decisively back toward optimism. For the first time in several years, we are witnessing a cluster of powerful signals—monetary policy, tax law, and supply fundamentals—that mirror the massive market run we saw in 2019 following the famous "Powell Pivot."
As real estate mogul Barbara Corcoran famously noted, "A funny thing happens in real estate. When it comes back, it comes back up like gangbusters." At SPI Advisory, we believe the "gangbusters" phase has officially begun.
Here is the data driving our conviction.
1. The Sentiment Shift: Capitalizing on the "Equity Reset"
The most immediate evidence of shifting sentiment is found in the capital markets. We recently completed two equity raises for DFW multifamily acquisitions that funded in record time. Investors are no longer sitting on the sidelines; they are specifically hunting for "reset stories."
We are currently in a unique window where sellers are being forced to exit, often losing most or all of their original equity. This allows us to acquire well-located, high-quality assets at a cost basis that was unimaginable just 24 months ago. In 2026, the smart money won’t just buy real estate; they will be buying the capitulation of the previous cycle.
Sidebar: What was the "Powell Pivot"?
In late 2018, the Fed was effectively on autopilot, incrementally raising rates while also shrinking the money supply via Quantitative Tightening (QT). This ultimately led to a massive market sell-off in December 2018.
On January 4, 2019, Fed Chair Jerome Powell executed a dramatic 180-degree turn. He abandoned the tightening path, signaled "patience," and began cutting rates that July and injecting liquidity by September of that year. This "Pivot" was the starting gun for one of the strongest runs in Texas multifamily history. Today, in December 2025, we are watching a different version of this history repeat.
2. Cap Rates and the Fed: 2018 vs. 2025
To understand why today’s setup is so compelling, we must look at the Federal Reserve's balance sheet. As mentioned above, in 2018, the Fed was actively draining liquidity from the economy. Today, the script has flipped.
| Metric | 2018 (The Tightening) | 2025 (The Pivot) |
|---|---|---|
| Market Cap Rate (DFW) | ~5.9% – 6.0% | ~5.5% – 5.7% |
| Fed Funds Rate | 2.25% – 2.50% (Rising) | 3.50% – 3.75% (Falling) |
| Monetary Policy | Quantitative Tightening (QT) | Quantitative Easing (QE) |
| Investor Outlook | Cautious | Opportunistic |
As of December 2025, the Fed has officially restarted Quantitative Easing (QE) and began expanding its balance sheet with $40B in monthly Treasury purchases while cutting rates to a "neutral" stance. We are entering the market with a massive tailwind starting to form.
3. The Supply Cliff: A Looming Delivery Desert
The headlines of 2024 were dominated by stories of over-supply. However, the ground-level reality in late 2025 is the opposite.
- The Crater in Starts: New multifamily starts in Texas have plummeted, down nearly 70% from their peak.
- The 2026/2027 Supply Gap: Because groundbreakings stalled over the last 18 months, we are heading toward a period of significantly lower new deliveries.
When the supply wave of 2024 is fully absorbed in the coming quarters, the lack of new competition in 2026 will lead to a recovery in pricing power and occupancy that we expect to last for several years.
4. The "OBBB" and Texas Tax Relief
Two massive regulatory shifts are acting as a "force multiplier" for investor returns:
- The OBBB Act: This landmark legislation officially reinstated 100% Bonus Depreciation for 2025 going forward permanently. This allows investors to shield significant amounts of income in Year 1—a powerful tool for after-tax IRR.
- Texas Property Tax Relief: New state legislation has introduced tighter caps on appraisal growth. Furthermore, appraisal districts are finally lowering assessed values to reflect the reality of the market reset of 2023–2025. Lowering the tax burden is one of the fastest ways to increase Net Operating Income (NOI) and, by extension, property valuations.
The Opportunity Window
At SPI, we believe this window of depressed valuations has roughly 12 months remaining before prices gap up to reflect the new interest rate environment, expanding liquidity, and the advantageous supply fundamentals.
As rates fall and QE injects liquidity, demand for high-quality syndications is already outpacing the supply of investment offerings. While many of our competitors remain on the sidelines, SPI Advisory is moving aggressively. With the benefit of hindsight, we believe this will be recognized as one of the most lucrative entry points in a long time.
In 2018, the market was waiting for the Fed to stop tightening. In 2025, the Fed has already started the engines. The window is open, the tax benefits are back, and the time to take action is now.
Secure Your Seat for the Next Run
As opportunities to invest in high quality assets at the market bottom become scarcer, our database members get the first look at our acquisitions and distressed “equity reset" deals.
Cheers,
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