The multifamily housing market has been undergoing significant changes as rent growth stabilizes and new supply enters the market at a rapid pace. According to recent data, national rent averages have seen slight declines, reflecting the impact of increased housing availability and shifting market conditions.
Rent Growth and Decline in National Averages
In October 2024, the average multifamily rent fell by $3, bringing the national average to $1,748. While this decline may seem small, it marks a continuation of a broader trend of rent stabilization following years of rapid growth. On a year-over-year basis, rent growth remained steady at 0.9%, fluctuating between 0.7% and 0.9% since the beginning of the year.
The minor rent decreases can be attributed to the large number of new units entering the market. So far in 2024, 329,000 new apartments have been absorbed, and the total number of new market-rate deliveries is expected to reach 554,000 by the end of the year. While demand remains steady, this surge in supply has outpaced it slightly, leading to a minor dip in occupancy rates.
In September 2024, multifamily occupancy fell by 10 basis points, bringing the overall rate to 94.7%. Although this decline is not drastic, it signals a shift toward a more balanced rental market, where renters may have increased negotiating power as more options become available.
Regional Variations in Rent Growth
Not all regions have experienced the same rent trends. The impact of new supply varies based on local market conditions, with some regions seeing strong rent growth, while others face more modest increases or even declines.
- Northeast, Mid-Atlantic, and Midwest: These regions have seen stronger rent growth due to a lower number of new apartment deliveries. Limited supply means landlords maintain pricing power, allowing rents to increase more consistently.
- Southeast and Southwest: In contrast, these areas have experienced a higher volume of new developments, leading to softer rent growth. The influx of new apartments has given renters more choices, keeping price increases in check.
Markets with rapid expansion, such as Austin, Phoenix, and Atlanta, have been more vulnerable to rent stagnation or slight decreases as they absorb new supply. Meanwhile, cities with more constrained development—such as New York, Boston, and Chicago—have maintained stronger rental growth due to demand exceeding supply.
Single-Family Rental Market Facing Declines
The single-family rental (SFR) sector has also seen its share of challenges. In October 2024, SFR rents fell by $8, bringing the average rent to $2,164—the largest decline recorded in recent years. Year-over-year rent growth in the sector has slowed significantly, falling 30 basis points to just 0.3%, while occupancy also declined by 10 basis points to 95.1%.
This trend reflects shifting renter preferences and affordability challenges. As more renters explore homeownership or move to newly developed multifamily units, the demand for single-family rentals has slightly weakened. Additionally, rising insurance and maintenance costs have made it more difficult for landlords to sustain rent increases.
Future Market Projections: Will Rent Growth Return?
Looking ahead, the current supply surge is expected to slow down in the coming years. While 2024 has seen record-breaking multifamily deliveries, new housing starts have begun to decline, suggesting that fewer units will be completed in 2026 and 2027.
This expected slowdown in supply could lead to renewed rent growth, as demand begins to outpace new deliveries. However, there are broader concerns about whether the U.S. is doing enough to address long-term housing affordability. A reduction in new developments could worsen the existing housing shortage, particularly in high-demand cities.
The Impact of Policy and Economic Factors
Beyond supply and demand fundamentals, government policies and economic trends will play a crucial role in shaping the multifamily housing market. The potential impact of new administration policies—such as tariffs, tax reforms, and immigration changes—could influence:
- Construction costs: Increased tariffs on building materials could raise development expenses, slowing down new construction and limiting future supply.
- Renter demand: Changes in immigration laws may impact population growth, affecting the number of potential renters in urban centers.
- Interest rates: If the Federal Reserve maintains high interest rates, borrowing costs for developers and homebuyers will remain elevated, keeping some renters in the rental market longer.
What This Means for Renters and Investors
For renters, the current trend provides more bargaining power, especially in markets with a flood of new apartment units. Tenants may see move-in specials, concessions, or slower rent hikes, giving them more flexibility in choosing housing options.
For real estate investors and landlords, this is a time to reassess market positioning. Investors in high-supply areas may need to offer incentives to retain tenants, while those in constrained markets could still see steady rental growth. Additionally, keeping an eye on policy changes and economic indicators will be essential for making informed investment decisions.
Conclusion
The multifamily housing market is evolving, with record supply levels moderating rent growth and giving renters more options. While short-term trends indicate a balanced rental market, long-term concerns about affordability and future supply constraints remain.
As the market shifts, both renters and industry professionals must stay informed about economic and policy developments that could shape housing trends in the coming years. Whether rent growth remains slow or picks up again will largely depend on how supply and demand dynamics evolve, along with the broader economic landscape.
Source: Multifamily Dive