Apartment rents drop further, with vacancies at record high

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There is still plenty of new supply making its way into the multifamily housing market. This, combined with weakening demand, especially from the youngest workers, is causing vacancies to rise and rents to fall.

According to Apartment List, the average apartment rent fell 1 percent in November compared to October and now stands at $1,367. This was the fourth consecutive month of decline. Apartment rents are down 1.1% from November 2024 and are down 5.2% from their peak in 2022.

“Earlier this year, annual growth appeared to be on track to turn positive for the first time since mid-2023, but that recovery stalled and reversed course during a particularly slow summer period,” according to Apartment List researchers.

The national multifamily vacancy rate, which reached a record high in October for this index whose roots date back to 2017, remained at 7.2% in November.

The historic surge in multifamily construction over the last few years is now in retreat, but a good supply of new units is still coming online at a time when demand is much weaker.

Fall has historically seen the biggest slowdown in multifamily rents, but this year it’s even more pronounced. CoStar reported the largest monthly declines in average rent it has seen in 15 years of tracking. The main reason for this is that more and more young people are finding it difficult to start new households.

“This 18- to 34-year-old group… I think they’ve got 32.5% who are living with their parents right now, which is the highest rate that’s been seen in a while,” said Grant Montgomery, CoStar’s national director of multifamily analytics. “I think this is a reflection of higher rent costs that have increased over the years, as well as a tougher job market for young people graduating from college.”

“That’s traditionally where a lot of the demand comes from; the main tenant demand comes from that kind of younger base,” he said.

The weakness is evident in stocks of large public agency REITs. Names like Bay of Avalon, Share Housing And Camden Property Trust They have all been in decline since the beginning of the year.

In some markets, rents appear to be falling faster than others due to local economic factors. For example, there is a slowdown in tourism in Las Vegas, which affects employment there. Boston has seen a decline in federal funding for biotechnology as well as a decline in the number of foreign students attending colleges and universities; both are hitting the rental industry hard. Austin, Texas, is seeing the biggest hit to rents, thanks to more construction of multifamily units.

As rents soften across the country and landlords increase concessions, renters are increasingly looking for more affordable markets.

Cincinnati, traditionally the busiest time for new rentals, was the most sought-after market, followed by Atlanta and Kansas City, Missouri, according to a Yardi report examining where apartment hunters were active last summer. St. St. Louis saw the largest quarterly increase in renter interest, with Washington, D.C. falling from the top spot to #4.

“The Midwest, in particular, has received more attention than ever before, signaling that many of the ‘hidden gem’ markets are no longer a secret,” according to the report, which found that 11 of the top 30 cities for tenant demand are in the Midwest.

Yardi also revised its expectations for 2026 supply, saying new supply would decline through 2027, but a larger-than-expected pipeline under construction caused it to raise its previous quarterly forecasts for 2025 and 2026 by 6.8% and 2.5%, respectively.

According to the Apartment List report, the overall market is expected to stabilize somewhat as construction continues to slow in the coming year.

“However, the supply boom still has some way to go, and the demand outlook is starting to look weaker in a shaky labor market,” the researchers wrote.