Despite facing numerous challenges during the past year, the multifamily industry had a standout year, benefiting from household confidence driven by lower inflation, solid employment rates, higher wages and a more accommodating Federal Reserve. Nearly 667,000 apartment units were absorbed during 2024, exceeding expectations for the sector, according to a RealPage analysis.
However, slower demand is expected during the coming year due to smaller-than-anticipated employment growth along with fiscal and monetary policy uncertainty. RealPage expects demand for new apartments to drop by more than 25% this year, although it still expects ‘decent’ absorption.
More than 588,000 units were delivered last year, with nearly a quarter of that supply coming online in five metros: Dallas, Austin, Phoenix, Houston and Atlanta. Based on permitting reports, RealPage expects more than 470,000 new apartments to come online in 2025, led by New York, Phoenix, Dallas and Newark.
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Effective rents at the national level grew 0.4% in 2024. Of the nation’s 50 largest apartment markets, 22 experienced rent decreases last year, with the most significant decline in Austin. Twenty-seven markets saw rents increase above the national level. Riverside was the only market to match the national rent growth rate, said RealPage.
Over the coming year, the firm expects rents to grow at a much faster pace of 2.5% nationwide annually. About half of the top 50 markets are expected to see above-average rent growth while 44% are expected to post a rent change below the national average and three major markets will grow similarly to the national average.
Austin is likely to continue to lag nationwide, while Orlando, Richmond, West Palm Beach and Philadelphia are expected to lead apartment rent growth with gains of between 3.5% and 4%.
RealPage highlighted macroeconomic factors that impacted the multifamily sector last year. U.S. employment grew month-over-month in November by 1.6%, with two million new jobs added. However, this was about 27% fewer new jobs than during the same period of 2023. RealPage said the employment slowdown was due in part to severe weather events, as well as several strikes at ports and factories across the country.
The country’s gross domestic product grew at a steady pace despite these challenges, and annual inflation settled at 2.7% in November. Real average hourly earnings grew 1.3% year over year in November. RealPage forecasts that the economy will generate about 1.4 million jobs in 2025 and inflation will continue to inch closer to the Fed’s target rate of 2%.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
