Through November 2024, national apartment occupancy held steady at 94.8% according to data from RealPage. Breaking this down across the country, the Northeast had the highest occupancy rate at 96.3% followed by the Midwest at 95.3% and the West at 95.2%. Occupancy for the Southern area of the country continued to struggle with an occupancy rate of 93.9% due to a higher level of supply in the region.
Over the past two years, there have been a record number of new units brought to market depressing rent growth and driving up vacancies. In fact, more apartments were delivered through the first nine months of 2024 than in all of 2023 — which itself set a 30-year record.  Additionally, the number of new apartments completed in 3Q 2024 alone was the highest for a single quarter in 50 years, according to Apartment List’s national rent report for December 2024.
As a result of investors and developers seeking to capitalize on the work-from-home trends during the pandemic, major core markets in the Southeast and Sunbelt have been feeling the pain from over-supply or overbuilding. Â And while the demand is there and the supply versus demand metrics are positive, too many units were built all at once creating significant competition for lease-up absorption.
As a result of supply and demand imbalances, rent growth has declined on a national level driven mainly by sharp declines in some of the hottest markets, such as Austin, Tampa, and Raleigh which saw explosive growth during the pandemic. According to a recent report by Redfin, this shift reflects a move toward affordability in these once red-hot regions. Data from the report also notes that Austin, Texas, experienced the steepest drop in asking rents at 12.4% year-over-year, followed by Tampa, Florida, and Raleigh, North Carolina, which saw declines of 11.3% and 8.4%, respectively.
Outside of the Sun Belt region, Cleveland, Ohio, recorded the largest year-over-year rent increase at 10.6%, followed by Louisville, Kentucky, at 10.2%. Other East Coast and Midwest cities, including Washington, D.C., and Baltimore, also posted strong rent growth, rising 9.4% year-over-year while cities in the Northeast and West Coast, including New York and San Francisco, are showing greater resilience due to tighter supply pipelines and strong job markets.
Current expectations for 2025 are that it will be a renter’s market, with the potential for the affordability gap between buying and renting to widen. In areas with continued high supply, rents could decline further, while markets with limited new construction may see rents rise as demand outpaces available inventory.
Sales volumes for multifamily properties remain well below pre-pandemic levels, with activity down 25% in transaction count and 20% in dollar volume compared to 2014–2019 averages, according to Marcus & Millichap’s annual multifamily investment outlook. High borrowing costs, rising expenses, and sidelined institutional capital have curbed deal flow, but many believe a potential rebound will occur in 2025 as market conditions stabilize and investor sentiment shifts. Further interest rate cuts by the Federal Reserve will be a godsend for the CRE industry as a lower cost of capital will be a much-needed shot in the arm and trigger a boom in sales, financing, and lease transactions over the next 12 to 24 months. According to a recent article in GlobeSt, in 2025, multifamily transaction volume is estimated to reach $400B-$450B. This compares to the record for transaction volume of $900B in 2021.
Overall, the outlook for the multifamily sector in 2025 remains positive. RealPage expects that there could be as many as 500,000 new apartment units delivered nationwide in 2025, a record-breaking figure not seen since 2008. Although this is expected to weigh on the market, analysts highlight strong wage growth and shifting renter preferences as factors that could support household formation and drive multifamily demand. Developers are also responding to shifting renter demand by incorporating sustainable amenities such as solar power systems and EV chargers to attract environmentally conscious tenants.
High-growth markets like Georgia, South Carolina, and North Carolina that offer affordable living and milder climates, will continue to attract renters and investors. States such as California and Nevada will see a growing demand for budget-friendly housing in markets with low affordability. Private equity and private credit firms have also begun stepping in to provide an alternative to traditional lenders and are expected to play a larger role in financing and refinancing deals in 2025.
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