The share of first-time home buyers dropped to a record low of 21%, while the typical age of first-time buyers climbed to an all-time high of 40. The share of first-time buyers in the market has contracted by 50% since 2007.
Major apartment REITs reported a shortage of new leases and stagnant rent growth, with some owners going so far as to lower guidance for the remainder of the year as economic concerns grow.
Renewed leases remain steadier as people stay put in uncertain economic conditions, but a dearth of new leases is stifling rent growth, according to third-quarter results released by five multifamily REITs this week.
“Blends began the quarter ahead of our expectations but over the last 45 days have decelerated beyond typical seasonality, which we largely attribute to the economic uncertainty,” said UDR CEO Michael Lacy.
Source: Biznow
The national median rent fell by 0.8% in October. This was the third consecutive month-over-month decline, as we’re now in the midst of the rental market’s off-season. It’s likely that we’ll continue to see further modest rent declines to close out the year.
Rent prices nationally are down 0.9% compared to one year ago. Year-over-year rent growth has been slightly negative for over two full years, and the national median rent has now fallen from its 2022 peak by a total of 4.2%.
While it’s expected to see rent prices dip slightly at this time of year, there’s been some shifts to the timing of rental market seasonality in recent years. Monthly rent growth peaked at +0.7 percent in March this year, but it then began to gradually trend down during the peak moving months, when rent growth is normally fastest. The flip to negative month-over-month growth also came a bit earlier than pre-pandemic years, making this the third straight year that prices have begun to dip in August.
The national multifamily vacancy rose to 7.2%, setting a new record high for the index. A healthy supply of new units are hitting the market and colliding with sluggish demand, causing vacancies to continue trending up.
Source: Apartment List
Yardi is raising its projection of new apartment supply: a larger-than-expected under-construction pipeline has led to upward forecast revisions for 2025, 2026 and 2027.
Over 400,000 units starting construction in 2025 looks increasingly likely. Current construction completion times are averaging around 24 months, making 2025’s new-construction activity a strong indicator that over 400,000 units will be completed in 2027.
Yardi expects deliveries to hit 410,000 units in 2028, before increasing to over 450,000 units by 2030.
Source: Yardi
U.S. apartment demand slowed in 3rd quarter, coming in well behind concurrent supply volumes. A little over 42,430 market-rate units were absorbed in the July to September time frame. This performance was about half the decade average for the market and quite a slowdown from what the U.S. has seen in much of the past two years.
This pullback seems to be driven largely by softening employment numbers, gloomy consumer sentiment and general uncertainty in the economy. Supply in 3rd quarter was also lower than what the market has seen in recent years, as the U.S. comes down from the delivery mountain that peaked in 2024. Still, at 105,525 units, supply for the quarter was still well ahead of concurrent demand.
Demand landed nearly 63,100 units short of concurrent supply in 2025’s 3rd quarter, marking one of the nation’s deepest 3rd quarter disparities going back to 1993. Only 3rd quarter 2022 saw demand fall further behind supply, and that was the result of the deep net move-outs during the quarter.
Source: RealPage
Renters across much of the U.S. have enjoyed easing prices and months of free rent this year. Now, this tenant-friendly environment looks poised to extend deep into next year, and perhaps beyond.
Apartment rents nationally are advancing at their slowest pace in years, thanks to the glut of new units that has taken longer than expected to absorb. More recently, job concerns among young people are posing a new threat to the rental market.
The U.S. unemployment rate for people aged 20 to 24 was 9.2% in August, more than double the overall rate. If a weaker job market continues, it could lead more of these renters to seek roommates or move back with their family, rather than get their own place.
National rent prices edged slightly higher for part of this year, buoyed by price rises in the Northeast and Midwest where new supply has been limited. But last month, national average rent fell 0.3% from August, the steepest September drop in more than 15 years.
Multifamily owners and analysts anticipated that 2025 would be the year that surplus supply balanced out and they regained their pricing power. Instead, landlords are now betting on the ability to raise rents by the end of 2026, or at least sometime in 2027.
Even that might be wishful thinking. Yardi Matrix recently lowered their projections for 2027 rent growth. They expect “more tepid” growth that year because of more new apartments coming online than originally expected.
Previously reliable demand drivers are starting to fizzle. Hiring for entry-level jobs is tightening. Employment growth is decelerating. Apartments are getting leased at record levels. But that is largely because of all the supply and because building owners are offering more tenant incentives. They agreed to concessions such as months of free rent on 37% of rentals in September—a record for that month—according to Zillow.
Some of the signs emerged this summer. Typically the hottest leasing season of the year, when college graduates start new jobs and rent new apartments, this summer saw national rent growth cool even further.
Source: Wall Street Journal
Source: RealPage
Softening fundamentals in the U.S. apartment market resulted in effective asking rents falling 0.3% in 3rd quarter. This was the first time rents have been cut between July and September since 2009, at the end of the Great Financial Crisis. In the year-ending 3rd quarter, rents were down a mild 0.1%.
Nearly 22% of apartments were offering concessions as of 3rd quarter, and the average concession was 6.2%. As operators focus on filling units in the coming months, concession utilization could become even more prevalent, making true rent growth harder to realize until discounts burn off.
Source: RealPage
Newmark shows their estimated size of the “potentially troubled” multifamily loans by year in the graph below. While $81 billion sounds like a lot, it’s less than 5% of the total multifamily debt market, and most of this stack will continue to get pushed forward into the future with lenders and property owners hoping interest rates come down or their NOI improves (or both).
Multifamily Market News 