Apartments.com Publishes Second Quarter 2025 Report on Rent Growth

Apartments.com Publishes Second Quarter 2025 Report on Rent Growth

Apartments.com, a leading rental marketplace and part of the CoStar Group, has released its second quarter 2025 report on multifamily rent growth across the United States. The findings reveal a gradual deceleration in asking rent growth, underscoring the evolving dynamics of the rental housing market as it continues to absorb a wave of new supply while grappling with changing demand patterns.

National Rent Trends Show Continued Moderation

According to the report, national year-over-year asking rent growth for multifamily apartments stood at 0.9% in Q2 2025. This figure represents a slight cooling compared to the 1.2% growth seen in Q1 2025. Since mid-2023, rent growth has remained relatively stable—hovering between 1.0% and 1.2%—following a steep decline from the highs recorded in 2021 and 2022. The slowdown in Q2 marks the first significant moderation in rent growth since early 2024, signaling a potential turning point in market sentiment.

The average national rent per unit rose to $1,773 by the end of the second quarter, up from a revised $1,763 at the close of Q1 2025 and $1,757 at the end of Q2 2024. On a quarter-over-quarter basis, this represents a 0.6% increase—modest compared to the 1.1% gain seen in the previous quarter. The data suggests that while rents continue to climb, the pace of growth is tapering off as supply and demand inch toward equilibrium.

Vacancy Rates Hold Steady Amid Supply Surge

Vacancy rates remained unchanged at 8.2% in the second quarter, maintaining this level for a third consecutive quarter. This consistent figure reflects a balance between new supply and demand absorption, though it remains notably elevated compared to pre-pandemic norms.

The second quarter recorded the absorption of 151,440 multifamily units nationwide. This represents a 21% increase over Q1 2025, indicating stronger leasing activity in the warmer months. However, it is still 9% lower than the absorption level observed in Q2 2024. Meanwhile, supply additions in Q2 reached 175,655 units—a robust 37% increase over the previous quarter. Still, this volume is 11% lower than the deliveries seen in the same period last year, suggesting a gradual winding down of the post-pandemic construction boom.

The fact that supply once again outpaced demand is consistent with a trend that has persisted since the fourth quarter of 2021. However, new construction starts have been on a steady decline for two years, pointing to a likely slowdown in new deliveries over the next 12 to 24 months. This deceleration could eventually ease vacancy pressures, especially in oversupplied regions.

Regional Market Performance: Winners and Laggards

Diverging regional performance is one of the standout themes of the Q2 2025 report. Among the top 50 largest U.S. apartment markets, San Francisco emerged as the strongest performer, posting an impressive 5.1% annual increase in asking rents. This was followed by Chicago (3.8%), San Jose (3.0%), and Cincinnati and Norfolk, both at 2.8%.

Many of these high-performing markets are located in the Midwest and Northeast—regions that have generally seen more conservative new supply pipelines. In these areas, construction activity has been more aligned with local demand, allowing rents to grow at a sustainable pace. In contrast, Sun Belt markets have struggled with the aftereffects of rapid development and overbuilding.

At the bottom of the performance ladder, Austin experienced the steepest rent decline, with asking rents falling by 4.3% year-over-year. Denver followed with a decline of 3.3%, while Phoenix recorded a 2.6% drop. In total, 15 markets saw negative annual rent growth in Q2 2025—14 of which were in the Sun Belt. These regions have faced significant headwinds due to oversupply, and market stabilization has been slower than anticipated.

Product Type Dynamics: Luxury vs. Mid-Tier

The absorption figures highlight continued strong demand for high-end apartments. Properties rated 4&5-Star, typically considered luxury or Class A, accounted for about 115,000 units, or roughly 75% of all units absorbed during the quarter. Despite this high level of leasing activity, annual asking rent growth in the luxury segment was the weakest, finishing June at just 0.5%, with a vacancy rate of 11.5%.

This contrast underscores a critical point: while luxury units are attracting tenants, the sheer volume of new supply aimed at this market segment is holding back rent growth. The elevated vacancy rate indicates that many of these properties still struggle to lease up quickly despite competitive pricing and amenities.

In comparison, mid-tier (3-Star) properties are faring better in terms of rent growth. These more affordable apartments are benefiting from a shift in demand as renters increasingly prioritize value. Vacancy in the 3-Star segment dropped to 7.5% by the end of Q2 2025, and annual rent growth reached 1.1%—outpacing that of luxury properties.

These trends suggest that the mid-market segment is gaining strength, driven by affordability concerns and economic pressures on tenants who might previously have considered more upscale options.

Outlook for 2025: A Return to Balance?

Looking ahead, the multifamily market is projected to add approximately 485,000 new units in 2025. This marks a significant drop—30% fewer than the 692,000 units delivered in 2024—and could signal a gradual return to a more balanced supply-demand environment.

As the post-pandemic development wave continues to recede, the likelihood of stabilization increases, particularly in markets where overbuilding has pushed vacancy rates higher and eroded pricing power. However, Apartments.com cautions that local market conditions will continue to vary widely, especially across asset classes and geographic regions.

Markets with slower construction pipelines and robust job growth—particularly in the Midwest and Northeast—are expected to see improved fundamentals. Meanwhile, Sun Belt cities may face continued challenges as they work through existing inventory and attempt to recalibrate supply in line with actual demand.

Final Thoughts

The second quarter of 2025 reinforces the notion that the multifamily housing market is in the midst of a soft correction. While rent growth remains positive at the national level, the pace is slowing. The moderation is not unexpected, given the historic highs reached during the pandemic recovery and the surge in new development that followed.

What emerges clearly from the data is a market that is becoming increasingly segmented by geography and asset quality. Investors, developers, and property managers must now pay closer attention to local supply-demand dynamics, particularly in overbuilt regions. At the same time, there are opportunities in more stable and underserved markets, where demand remains strong, and supply remains in check.

The report from Apartments.com offers valuable insights for industry stakeholders navigating this transitional period. Whether these conditions lead to a new equilibrium or more volatility ahead will depend on how quickly supply aligns with evolving renter preferences and macroeconomic realities.

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