Old historic buildings and row houses near Washington Park in the Over-The-Rhine neighborhood in Cincinnati, Ohio.
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A multitude of new offerings continue to make their way into the multifamily housing market. This situation, coupled with weakening demand, particularly from younger workers, is causing vacancy rates to rise and rents to fall.
The national median rent for apartments decreased 1% in November compared to October and now stands at $1,367, according to Apartment List. This is the fourth consecutive month-over-month decline. Apartment rents are down 1.1% from November 2024 and 5.2% from their peak in 2022.
“Earlier this year it appeared that annual growth was on track to turn positive for the first time since mid-2023; however, this rebound stalled and reversed course during a particularly slow summer,” according to Apartment List researchers.
After reaching a record high for this index, which dates back to 2017, in October, the national multifamily vacancy rate remained at 7.2% in November.
The historic boom in multifamily construction in recent years is waning, but a significant supply of new housing continues to come on stream at a time when demand is much lower.
The drop is historically the one that marks the sharpest slowdown in multifamily rents, but this year it is even more pronounced. CoStar reported the largest monthly declines in median rent it has seen in 15 years of tracking. The main reason is that more and more young people are finding it difficult to start a new home.
“That 18- to 34-year-old group…I think up to 32.5 percent of them are now living with family, and that’s the highest level it’s been in a while,” said Grant Montgomery, CoStar’s national director of multifamily analysis. “I think this reflects high rental costs that have increased over the years, as well as a tougher job market for young people just out of college.”
“That’s where a lot of the demand traditionally comes from, the main tenant demand comes from that sort of younger base,” he said.
The weakness is showing up in the stocks of major public apartment REITs. Names like Avalon Bay, Home Equity Residential And Camden Real Estate Trust are all down since the start of the year.
Some markets are seeing rents fall faster than others, due to local economic factors. Las Vegas, for example, is experiencing a slowdown in tourism, which has negative consequences for jobs. Boston has seen a decline in federal funding for biotechnology as well as a decline in the number of foreign students at its colleges and universities; both have a harsh impact on its rental sector. Rents are being hit hardest in Austin, Texas, thanks to ever-increasing construction of multi-family units.
As rents fall nationwide and landlords increase concessions, tenants are increasingly seeking more affordable markets.
Cincinnati was the most sought-after market, followed by Atlanta and Kansas City, Missouri, according to a Yardi report that looked at where apartment hunters were active last summer, the traditionally busiest time for new rentals. St. Louis saw the largest quarterly increase in renter interest, and Washington, D.C., moved from first place to fourth place.
“The Midwest, in particular, has attracted more attention than ever, signaling that many of its ‘hidden gem’ markets are no longer a secret,” according to the report, which found that 11 of the top 30 cities in terms of tenant demand are in the Midwest.
Yardi also revised its expectations for 2026 supply, saying that although new supply will decline through 2027, a larger-than-expected pipeline under construction caused it to increase its previous quarterly estimates for 2025 and 2026 by 6.8% and 2.5%, respectively.
As construction continues to slow next year, the overall market is expected to stabilize somewhat, according to the Apartment List report.
“That said, the supply boom still has some way to go, and the demand outlook has started to look weaker in a fragile labor market,” the researchers wrote.