Multifamily Housing Market Experiencing Growth Amid Ongoing Rental Declines

Overview of Rental Market Trends

As the multifamily housing sector expands, anticipated growth in rental stock is set to increase by 1.1%, pushing the total units available to over 49 million by fall 2025. The most substantial surges in supply are projected for regions in the South and West, providing a responsive solution to nationwide demand for rental properties.

Key Insights from October 2024 Rental Data

According to Realtor.com’s October Rental Report, rents experienced a 0.8% decrease, averaging $1,720—marking the fifteenth consecutive month of year-over-year rent declines. This decrease was particularly pronounced in smaller units. The report highlights the following key points:

• Smaller units saw the most significant drops in rent.
• New rental properties entering the market are likely to exert continued downward pressure on rents in the upcoming year.

Expert Commentary on Rental Supply

Danielle Hale, Chief Economist at Realtor.com, states, "New multifamily construction projects initiated over the last two years are now entering the market, easing pressure on rents and providing much-needed relief for renters. Although fewer multifamily homes are expected to be completed in 2025, the anticipated increase in supply will still keep rents in check."

Growth in Multifamily Housing Completions

The year 2024 witnessed a surge in completed multifamily homes, attributed to projects that began in 2022 and 2023. From January to September 2024, the average annual rate of multifamily completions soared to 606,000 units—significantly higher than the 445,000 units from the same period in 2023, and surpassing the pre-pandemic average of 359,000 units observed between 2017 and 2019.

• Despite a projected decrease in completions next year, the rental housing stock is still expected to grow by 1.1% over the next year.

Projected Supply Growth by Region

The upcoming years are set to see increased rental stock, especially in the South:

• South: Projected to grow by 1.5% year-over-year
• West: Anticipated increase of 1.2%
• Midwest: Expected growth of 0.9%
• Northeast: Minimal increase of 0.7%

By fall 2025, the estimated increases in rental stock from pre-pandemic levels include:

• South: 8.9%
• West: 8.6%
• Northeast: 5.0%
• Midwest: 1.7%

Rental Prices Reflect National Trends

October marked a continuing trend of decreasing rents across various unit sizes, including:

• Studios: Median rent fell 1.2% to $1,436
• One-bedroom units: Decreased 0.9% to $1,600
• Two-bedroom units: Dropped 0.7% to $1,908

Although this marks a decline from previous peaks, current rents still show marked increases when compared to five years ago.

Notable Regional Rent Declines

The report indicates significant rent drops across regions, particularly:

• South:

  • Memphis, TN: -5.4%
  • Nashville, TN: -5.2%

• Midwest:

  • Chicago: -4.1%

• West:

  • Denver: -5.6%
  • Phoenix: -4.5%
• Northeast: Notable growth in areas like New York with a minor 0.4% increase.

Conclusion

The ongoing expansion of the multifamily housing market promises relief for renters facing declining rents across various unit sizes. Increased supply from multifamily constructions is expected to stabilize the market, particularly in the South and West regions. This trend not only serves current tenants but also points towards a more balanced rental landscape in the near future.

For more detailed insights into rental trends, Realtor.com provides comprehensive data and analysis for prospective renters and investors alike.

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