January 2025 saw a slight shake-up in the leaders in monthly rent growth. Top performers included Detroit, Houston, Los Angeles, Philadelphia and San Francisco. The rise was caused by a 0.3% increase in renters-by-necessity and a 0.1% increase in lifestyle renters. Advertised rents rose 0.2% month-over-month in January. However, monthly prices declined in nine of the 30 metros analyzed, including Columbus, OH and Chicago.

The single-family build-to-rent sector is also performing well. Advertised rents rose $5 to $2,157 in January, and year-over-year growth climbed 20 basis points. Occupancy remained at 94.7% in January, but year-over-year was down 0.7%. SFR demand is fueled by the lack of affordable homes on the market: the four million homes sold nationally in 2024 was the lowest number in 30 years, according to National Association of Realtors data cited in the report.

The biggest increases in SFR occupancy were in Nashville, Jacksonville, Austin, Chicago, and Central Valley. The highest rent increases were in Kansas City, Detroit, Grand Rapids, Salt Lake City and San Antonio.

Investors seem to be piling in, leading to a sharp increase in SFR mortgage-backed securities. “Issuers floated $7.8 billion of bonds backed by SFR in 2024, up 118.7% year-over-year, according to securitization publication Asset-Backed Alert. While this is still below the peak of $16.9 billion in 2021, last year’s issuance represents one of the highest totals in market history,” the report stated. “The most-active SFR issuers in 2024 included Pretium Partners ($3.0 billion), Tricon Residential ($2.1 billion), Amherst ($826 million) and Invitation Homes ($825 million).”

The report also commented on the mood at the National Multifamily Housing Council’s recent annual meeting in Las Vegas. It found a degree of optimism based on the strong economy, expectations of strong multifamily demand continuing, and support from investors that provides liquidity in the capital markets.

There was also concern about political uncertainty and fears that the tariffs being imposed on Canadian and Mexican construction materials like lumber, plastics, flooring – and now all foreign aluminum and steel – could trigger retaliation. Curtailing immigration could also hit job growth and apartment demand.

In addition, there was concern that high interest rates could make debt and equity transactions difficult to complete – especially if the 10-year Treasury rate remains above 4.5% -- even though there is ample liquidity in the market and construction debt is readily available.

“Terms are loosening, but there are strings,” the report stated. “Commercial banks are willing to write construction loans for clients with banking relationships and if they can get permanent take-out financing. Life companies are also active, as are debt funds, which are a higher-cost, higher-leverage option.”