A version of this article first appeared in the CNBC Property Play newsletter with Diana Orrick. Property Play covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large publicly traded companies. Sign up to receive future editions directly to your inbox.
There is still a large amount of new supply entering the multifamily housing market. This, combined with a decline in demand, especially from younger workers, has led to more vacancies and lower rents.
The median apartment rent nationwide fell 1% in November from October and now stands at $1,367, according to Apartment List. This is the fourth consecutive month-on-month decrease. Apartment rents have fallen 1.1% since November 2024 and 5.2% from their 2022 peak.
“Earlier this year, annual growth appeared to be on track to turn positive for the first time since mid-2023, but the recovery stalled and reversed trajectory during a particularly weak summer,” Apartment List researchers said.
After hitting a record high in October, the index, which dates back to 2017, saw the national multifamily vacancy rate remain at 7.2% in November.
Although the historic surge in multifamily construction over the past few years is now receding, there is still an ample supply of new units despite significantly lower demand.
Historically, the biggest slowdown in multifamily rents occurs in the fall, but this year it’s even more pronounced. Coster reported the largest decline in average monthly rent in its 15 years of tracking. The main reason for this is that an increasing number of young people are struggling to form new households.
“In the 18-34 age group…I think up to 32.5% are currently living with a family, which is the highest number we’ve seen in a while,” said Grant Montgomery, national director of multifamily analysis at CoStar. “I think this reflects the high rents that have gone up in recent years and the tough job market for young people just graduating from university.”
“Traditionally that’s where a lot of the demand comes from. The core rental demand is from that kind of younger demographic,” he said.
Weakness is evident in the stock prices of major public apartment REITs. a name like avalon bay, stock housing and Camden Property Trust Everything has been down since the beginning of the year.
Some markets are seeing rents fall faster than others due to local economic factors. For example, Las Vegas continues to experience a decline in tourism, which is hurting employment. In Boston, federal funding for biotechnology has declined and international student enrollment at colleges and universities has declined. Both are having a major impact on the rental sector. In Austin, Texas, where more multifamily housing is being built, rents have taken the biggest hit.
While rents are softening across the country and landlords are expanding concessions, renters are increasingly looking for more affordable markets.
The most searched market was Cincinnati, followed by Atlanta and Kansas City, Missouri, according to a Yardi report that looked at areas where apartment searches were active last summer, traditionally the busiest time for new rentals. St. Louis saw the biggest increase in tenant interest in the quarter, while Washington, D.C., dropped from the top spot to fourth place.
“The Midwest in particular is attracting more attention than ever, showing that many of its ‘hidden gem’ markets are no longer secrets,” the report said, revealing that 11 of the top 30 cities in rental demand are located in the Midwest.
Yardi also revised its supply forecast for 2026, saying new supply will decline through 2027, but the company raised its previous quarterly forecasts for 2025 and 2026 by 6.8% and 2.5%, respectively, due to stronger-than-expected pipelines under construction.
The overall market should stabilize to some extent as construction continues to slow next year, according to the Apartment List report.
“However, the supply boom still has some run left, and the demand outlook is beginning to weaken amid a volatile labor market,” the researchers wrote.
