Written by Rachel Farrow
The multifamily market is still adjusting to 2024’s 40-year record of new deliveries. As we progress through 2025, this supply continues to impact vacancy rates, rent growth, renewal strategies, and investment dynamics. Though the market remains resilient, keeping a close eye on regional supply levels is essential.
Despite strong housing demand, the 677,000 units added in 2024 are keeping vacancy rates elevated and rent growth subdued. Projections indicate that vacancy may reach 6.2% by the end of the year, while rent growth is expected to average 2.2%—below the long-term historical average of 2.8%. Concessions, such as move-in specials and renewal incentives, have surged as operators compete for, and try and salvage, occupancy. As of January 2025, 39% of communities offered concessions, up significantly from 7% in 2022.
Several large markets are still experiencing an influx of new deliveries, particularly in the Sun Belt and a couple of Western metros. Texas’ three largest cities—Dallas, Austin, and Houston—are each expected to receive between 14,000 and 27,000 new units this year. Other high-supply markets include Charlotte, Raleigh, Atlanta, and Orlando, with Seattle and Denver also seeing substantial deliveries. Los Angeles is reaching an all-time high for new supply in 2025, with 19,400 units expected in Q3 alone marking a 1.6% annual inventory growth. Analysts are not yet sure what effect the devastating wildfires will have on these predictions.
With that said, supply is moderating significantly the Midwest, Northeast and coastal regions, dropping the total down to approximately 346,000 units this year. By 2026, new supply levels are forecasted to return to pre-pandemic norms, helping vacancy rates decline as absorption catches up. With homeownership affordability remaining a challenge, demand for rentals should persist, ultimately supporting a positive long-term outlook.
Top Rent Growth Cities (January 2025):
Providence, RI (+3.9%)
Rochester, NY (+3.5%)
Grand Rapids, MI (+3.3%)
Omaha, NE (+3.2%)
Kansas City, MO (+3.2%)
Largest Rent Declines (January 2025):
Austin, TX (-4.2%)
Denver, CO (-3.2%)
Huntsville, AL (-3.0%)
Colorado Springs, CO (-2.4%)
Phoenix, AZ (-1.8%)
Multifamily transactions remain impacted by high and volatile interest rates, along with rising cap rates. While originations were sluggish in 2023 and 2024, we expect a moderate rebound in 2025. Multifamily lending volume is projected to total between $370 billion and $380 billion, fueled by refinancing needs, a backlog of stalled deals, and stabilizing property prices.
Key Takeaways for Industry Stakeholders
High-Supply Markets Face Softened Rent Growth: Cities with large delivery pipelines— Phoenix, Dallas, Austin, Denver, and Raleigh—are struggling with rising vacancy and rent concessions in the short term.
Investment Market Gears for a Comeback: Multifamily financing activity is picking up in 2025 but remains below the peaks of 2021-2022.
Slowing Deliveries Will Stabilize Market: As new construction slows by 2026, supply-demand fundamentals should improve, leading to stronger occupancy and rent growth.
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