Apartment Rent Growth Falls Short in First Half, But Rebound Expected in 2025

Despite strong demand for apartments nationwide, rent growth has underperformed expectations in the first half of 2024. RealPage's Q2 report reveals a slower pace of growth than anticipated, particularly in major markets.

Key Findings from RealPage's Q2 Report:

• Moderate Growth: Roughly half of the top 50 U.S. rental markets are projected to see annual rent growth between 2% and 3% for 2024. Another 25% are expected to experience growth between 1% and 2%.
• Stagnant or Declining Rents: A significant 18% of markets may see rent growth fall below 1%, with a few facing flat or even declining rents. Notably, Atlanta and Jacksonville are forecasted to have rent declines exceeding 1%.

Market Dynamics:

• Job Market Strength: The robust job market, with over 1.3 million jobs created in the first half of 2024 (Bureau of Labor Statistics), continues to fuel demand for apartments. Major cities like New York, Los Angeles, Phoenix, and Dallas are expected to see the strongest job growth.
• Increased Supply: A significant number of new apartment units (over 629,000) delivered in 2024 is a potential contributor to the slower rent growth. However, with absorption projected at around 612,000 units, vacancy rates are not expected to surge dramatically.
• Shifting Landscape in 2025: A slowdown in apartment deliveries is anticipated for 2025, with completions dropping by roughly 20%. This, coupled with continued strong demand, could lead to a rebound in rent growth.

Conclusion:

The first half of 2024 presented a slower-than-expected environment for apartment rent growth. However, the future appears promising. A projected decrease in new unit deliveries combined with healthy job markets points towards a potential rent growth surge in 2025. This information is valuable for both renters and investors. Renters can use this knowledge to plan ahead for potential rent increases, while investors can use it to make informed decisions about their multifamily investments.

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