Multifamily development is expected to remain sluggish in the first half of 2025 after declining at an annual rate of 25% in 2024, based on construction starts. But construction is expected to pick up in the second half of the year as renters fill up apartments that were overbuilt in some U.S. regions, according to the National Association of Home Builders.

The trade group said high interest rates, along with lingering construction supply disruptions stemming from the pandemic, are likely to keep impeding U.S. multifamily developers in this year’s first half. But projects should begin penciling out more favorably later this year.

Multifamily construction is expected to revert to long-term trends toward the end of 2025 “as the market works through a substantial number of units under construction,” Danushka Nanayakkara-Skillington, the NAHB’s assistant vice president for forecasting and analysis, said in a statement Wednesday.

The builder group is expecting multifamily starts to fall 11% this year before increasing 6% in 2026 as financing and demand fundamentals improve. The U.S. overall became oversaturated with apartments during 2024, when construction was underway on about 1 million units, the highest level since 1973.