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Key takeaways
- The odds of a recession are between 40% and 50%, according to Moody’s and J.P. Morgan Research.
- Any recession would likely be mild, depending on trade policy severity and duration.
- Multifamily investors entering this period with strong balance sheets could find attractive buying opportunities.
J.P. Morgan Research clocks the probability of a recession occurring in 2025 at below 40%, down from 60% in April. We asked Al Brooks, Vice Chair of Commercial Banking at J.P. Morgan; Tom LaSalvia, Head of Commercial Real Estate Economics for Moody’s; and Ginger Chambless, Head of Research for Commercial Banking at J.P. Morgan, to weigh in on the potential impact on multifamily properties.
An economic downturn could have wide-ranging effects across commercial real estate.
They all agreed: A mild recession is possible. And uncertainty is one of the few things you can count on in the current economy.
Why the economy is teetering on a recession
The Trump administration’s trade policy moves could increase inflation and complicate the interest rate outlook. These policy changes contribute to market volatility and could steer the economy into a recession.
There’s about a 50% chance of a recession, according to LaSalvia. “The current baseline forecast has the economy narrowly avoiding a recession,” he said. “But if there isn’t near-term, meaningful progress on tariff negotiations in the coming weeks, the economy will likely slip into a recession."
The good news? “We expect a recession would be relatively mild—not as bad as the COVID recession or the global financial crisis,” Chambless said. “Leverage doesn’t look worrisome across households, corporates or the banking sector.”
The U.S. economy has two firewalls that help protect against a severe recession, LaSalvia said.
- “The labor market is coming into this situation in a position of strength,” he said. “Businesses have been reluctant to lay off skilled labor due to a shortage of supply, something unlikely to change in the current environment given immigration policies.”
- “The top third of U.S. consumers are well-positioned to handle an economic moderation and will likely provide a backstop to the economy,” he said. “This group’s continued spending prevents a negative spiral of declining consumer and business activity.”
How a recession could impact multifamily rental properties
"I think multifamily housing is absolutely where you want to be as an investor," Brooks said. The multifamily rental market may still feel the impact of a recession, but to a lesser degree than other asset classes.
“With housing being a necessity, sector performance tends to hold up well in mild recessionary periods,” LaSalvia said.
“What’s slightly different in the current situation is the record new supply that hit the market over the past few years,” LaSalvia said. “With a current vacancy rate above 6% nationally, rent growth has suffered. Any type of economic slowdown could cause rent levels to remain flat or even pull back slightly.”
Multifamily properties could be impacted differently based on their location as well as whether they’re luxury, market-rate or workforce housing.
“In a recession, apartments in secondary and tertiary markets are what I’m concerned about,” Brooks said.
“Many South Atlantic and Southwest markets, such as Austin, Texas, have seen vacancy rates rise above 10% due to oversupply and slipping demand,” LaSalvia said. “If a market with this level of slack sees a precipitous drop in willingness or ability to pay for high-end apartments, concessions—or even declines—in asking rents will increase.”
“In contrast, markets with low rent-to-income ratios and without a recent glut of new supply, some in the South Atlantic and Southwest regions, will continue to see resilient—if not increased—demand,” he said.
A recession could impact multifamily rental properties in other ways.
- Home purchases: In April 2025, the median existing-home sales price rose to $414,000, according to the National Association of Realtors. That’s an all-time high for the month of April and the 22nd consecutive month of year-over-year price increases. Existing home sales also dropped and may decline further if a recession occurs, causing more potential single-family homeowners to rent and driving up demand for multifamily properties.
- Stagflation: “Besides a garden variety of recession, there’s also the chance for stagflation,” Brooks said. The odds of slowing economic growth, high unemployment and rising prices are limited, but stagflation is still a possibility that multifamily investors should prepare for.
How multifamily can prepare for a recession
To become recession-ready, investors can:
- Streamline operations: By scrutinizing operations, owners and investors can identify problem areas and inefficiencies. For example, closer examination may show that processing rental payments delays deposits.
- Keep an eye on economic data: “We’ve seen politicization of consumer and household sentiment, but the proof will be in the actions of the consumer and the corresponding actions of business owners,” LaSalvia said. “If consumers get spooked and behavior changes rapidly and dramatically, then businesses will cut back on hiring and layoffs are likely to ensue.”
- Maintain a fortress balance sheet: "The most important thing multifamily investors can do is not overleverage themselves," Brooks said. "Investors should position themselves to be buyers in a difficult economic period versus having to sell."
Multifamily isn’t the only asset class that could feel the impacts of a recession. Find out the potential impacts of an economic downturn across commercial real estate.
JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/commercial-banking/legal-disclaimer for disclosures and disclaimers related to this content.
