📢U.S. multifamily rent growth has flattened after three years of double-digit surges. National average effective rent declined –0.23% in August 2025, leaving YoY growth at just +1.0%. Supply, not demand, is the key driver: nearly 1M units hitting in 2024–2025 have lifted vacancies to 7.2%, with oversupplied Sunbelt markets turning negative on rent growth.
National average effective rent: $1,713 (–0.23% MoM, +1.0% YoY)【CoStar】
Regional August MoM rent change: West –0.5%, South –0.4%, Midwest –0.2%, Northeast –0.1%【CoStar】
Metro YoY rent: Austin –4.7%, Denver –3.5%, Phoenix –3.1%; San Francisco +6.2%【CoStar】
Vacancy: 7.2% (vs. 5.8% in early 2022)【CoStar】
Supply deliveries: ~950k units (2024–2025)【S&P Global】
Annual absorption: ~795k units, record high【RealPage】
Cap rate expansion: +50–75 bps YoY; values down 10–20% in overbuilt markets【S&P Global】
Loan Performance
While distress in stabilized multifamily remains limited, valuation resets are pressuring borrowers with upcoming maturities. With cap rates up 50–75 bps, some owners face LTV breaches if refinancing at today’s 6–6.5% agency debt rates. Construction loans in oversupplied metros are the riskiest: lease-up delays extend stabilization timelines, and rising operating costs cut projected DSCR. Special servicers note early-stage transfers are creeping up in Austin and Phoenix.
Demand Dynamics
Absorption remains strong at ~795k units annually, yet demand is insufficient to offset peak deliveries. Renters continue to form households and stay in rental stock due to high homeownership costs. The mismatch lies in product type: Class A urban towers compete heavily, pushing rents down and concessions up, while Class B/C housing is steady with higher retention. Regional divergence is sharp: coastal cities like San Francisco (+6.2% YoY) rebound on job gains, while Sunbelt boomtowns face elevated vacancy.
Asset Strategies
Owners are prioritizing occupancy over rent growth, deploying concessions like one month free or rent credits to sustain cash flow. Value-add investors are scaling back premium upgrades and focusing on essentials (in-unit laundry, durable finishes) that defend rent without overspending. Asset class bifurcation is critical: Class A properties underwrite with 8%+ economic vacancy; Class B suburban assets closer to 4%. Tax reassessments and insurance hikes, particularly in Texas and Florida, are eroding NOI and forcing more conservative expense budgets.
Capital Markets
Transaction volumes are down ~50% YoY as bid-ask gaps persist. Buyers are pricing deals at higher exit caps (5.5%–5.75%), particularly in oversupplied metros, forcing sellers to mark values down 10–20% from peaks. Equity still targets multifamily selectively—secondary Midwest markets with balanced supply-demand profiles are attracting yield-driven capital. Development financing is scarce; banks have retreated, and debt funds demand higher spreads. Ironically, this pullback may set up a healthier rent environment once the 2024–25 supply cohort is absorbed.
Rent growth has normalized to 0–2%, far below pandemic peaks.
Oversupply is the dominant factor driving vacancies up and rents down.
Class B/C housing remains more resilient than Class A lease-ups.
Investors shifting to selective strategies, favoring stable Midwest/Coastal submarkets.
🛠 Operator’s Lens
Prioritize renewals: offer flat rents or modest increases to retain tenants and avoid costly turnover.
Adjust marketing: monitor competitors’ concessions and match aggressively in high-supply metros.
Control expenses: appeal property tax assessments, bulk-purchase supplies, and improve utility efficiency.
Optimize lease structures: consider flexible terms (e.g., 15 for 14 months) to bridge into stronger seasons.
The next 12–18 months will remain pressured as 950k new units deliver into already elevated vacancy. Investors should underwrite flat rents and higher concessions until 2026, when the pipeline moderates. Markets with high construction exposure will continue to see rent declines, while constrained metros like San Francisco, Chicago, and New York should sustain modest gains.
Over the medium term, the U.S. housing shortage and limited for-sale affordability support rental demand. If developers continue pausing new projects due to tighter financing, supply-demand dynamics should rebalance post-2025, paving the way for a return to 2–3% annual rent growth. Long-run fundamentals remain intact; the short-term challenge is weathering supply-driven softness.
CoStar link , S&P Global link , RealPage link
Chart 1 – Top & Bottom Metro Rent Growth (YoY % as of Aug 2025)
Chart 2 – Regional Apartment Rent Growth vs Vacancy (Aug 2025)
