Multifamily Marks Two Years of Easing Rents
Rents have been easing for two full years after falling again in July to a median $1,712 for a 0-2 bedroom unit in the 50 largest markets. Rents fell 2.5%, or $43, compared with July 2024, according to Realtor.com’s July rent report.
This year’s seasonal lift in rents has been softer than usual, with prices up just 1.2% year-to-date compared with 2.8% growth over the same period in 2024, the report said. However, rent prices remain 17.4% above pre-pandemic levels, although they are now 2.7% below their August 2022 peak.
“Rents have now declined for two full years, giving renters more leverage and financial breathing room than they've had in some time,” said Realtor.com Chief Economist Danielle Hale. “But there are early signs that relief may not last forever.”
In particular, future rental supply may soon face pressure as multifamily development pulls back due to rising construction costs and new tariffs on key materials, including aluminum, steel and lumber. In June, completions of buildings with two or more units fell 38.1% year-over-year, dropping from 656,000 units in June 2024 to 406,000 this year. In addition to elevated construction costs, this significant decline reflects shrinking profit margins due to lower rents.
The impact varies across the country, with the Midwest seeing the steepest annual drop in completions, down 55.7%, followed by the South, down 33.5%, the Northeast, dropping 33% and the West, plunging by 28.9%.
Permitting trends also signal a slowdown in construction. Permits for multifamily units in Orlando dropped 55% from the first quarter to the second quarter of this year. That represents the first Q2 decline in the city since 2022. Meanwhile, Q2 permitting dropped for the first time in three years in Philadelphia, San Antonio, Charlotte and Las Vegas, according to the report. San Francisco posted a modest increase in permitting, but it was the market’s slowest Q2 growth in permitting in three years.
Realtor.com said these local slowdowns suggest developers are reducing plans for new projects in the face of worsening economic conditions.
“If construction pullbacks continue, today’s renter-friendly market could give way to a tighter, more competitive landscape,” said Hale. “It’s a trend we’ll be watching closely, especially in markets that had previously led the way in multifamily development.”