Overview
The Case for Secondary Markets
Structural shifts in housing demand, affordability, and migration are redefining where multifamily investment opportunity lives. Our latest research makes the case for naturally affordable communities in high-growth Southeast markets.
The U.S. housing market is undergoing a deep restructuring. A decade-long shift in how Americans consume housing, a historic affordability crisis, and sustained migration toward the Sunbelt are converging to create a powerful demand story for rental housing — particularly in naturally affordable communities across the Southeast.
At the same time, new development has largely bypassed many secondary markets where current rent levels do not support new construction economics. This supply-demand imbalance, combined with a fragmented ownership landscape and rising owner distress, is creating a compelling window for institutional investors to acquire well-located multifamily assets at attractive discounts to replacement cost.
4.5M
National housing shortage in homes, comparing household formation to new construction
60%
Share of national multifamily demand concentrated in the Southeast — while representing only 42% of existing stock
38
Average age of a first-time home buyer today, up from 28 in the 1980s
40%
Projected decline in new apartment deliveries this year versus 2024 peak, falling below pre-COVID averages
The Disappearing First-Time Home Buyer
The average first-time home buyer is now 38 years old — a full decade older than in the 1980s. First-time buyer participation has dropped to just 21%, down from 34% pre-COVID. The driving force: a profound lack of affordability. In 2021, a family needed $79,000 in annual income to afford the median-priced U.S. home.
Today, that figure has surged to $127,000. According to Harvard's Joint Center for Housing Studies, only 6 million of the nation's 48 million households meet that threshold — a key factor behind home sales hitting a 30-year low. Meanwhile, Gen-Z is entering the rental market at rates well below millennial homeownership at the same life stage, adding 4.4 million new renters in just five years. And they are heading South.
Renting as a Lifestyle Choice — and Necessity
It's not just affordability pushing people toward renting. One-third of U.S. renters are now classified as renters by choice — an increase of over 3 million households in the last decade.
A significant portion of that growth comes from Americans over 65, a cohort that has expanded by 2.4 million renters in ten years. These older renters tend to afford higher rents and gravitate toward areas near their grandchildren — effectively following where Gen-Z and Millennials are choosing to live. The result is a demographic tailwind reinforcing demand across multiple renter segments simultaneously.
The Southeast Growth Story
While new construction has surged in gateway cities like Charlotte, Atlanta, and Nashville, secondary markets face a different reality. Rent levels in these communities are too low to justify new development at current construction costs — effectively creating an economic barrier to new supply.
Existing multifamily assets in these markets trade at $150,000–$175,000 per unit, while replacement cost sits at $250,000–$260,000. A unit renovation costing $6,000–$8,000 can generate a monthly rent premium of $125–$150, compared to the $700–$1,000 premium needed to pencil new construction.
At the same time, the stock of lower-rent units is shrinking. Between 2015 and 2022, the share of units renting below $1,000/month declined by 66% while units above $2,000 doubled. An estimated 11.7 million rental units built before 1980 are in need of renovation.
The Southeast Growth Story
Over the past decade, job growth in the Southeast outpaced non-Sunbelt markets by more than two to one — 20% versus 9%. The Southeast now accounts for roughly 60% of national multifamily demand while representing only 42% of existing apartment stock.
We are now seeing a second wave: internal migration within the Sunbelt itself, as rising costs in Atlanta, Charlotte, and Nashville push residents toward more affordable secondary markets. Cities like Macon-Warner Robins, GA, Fayetteville, NC, and Greenville, SC are experiencing consistent economic growth and steady population inflows.
Why Naturally Affordable Multifamily Is Resilient
The naturally affordable segment of rental housing serves a workforce that is more insulated from AI-driven disruption — construction workers, nurses, first responders, teachers, and skilled tradespeople. The multifamily market is also one of the most fragmented in the U.S. economy, with the top 50 owners holding just 11% of total apartment stock.
This fragmentation creates opportunities to acquire assets from small, local owners and apply institutional management, improved operations, and additional revenue strategies to drive meaningful NOI growth. Rising owner distress — particularly among those who acquired during the low-rate COVID era — is adding further acquisition opportunity.
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