Apartment demand has remained strong in 2025 as elevated mortgage rates continue to make renting more affordable than buying and new construction slows.
Avison Young’s third-quarter U.S. multifamily report found that the average monthly mortgage payment is now $825 higher than the average multifamily rent—the widest gap since before 2020. Rising interest rates and modest home price appreciation have widened that spread, keeping multifamily absorption closely aligned with new deliveries. The gap between units delivered and units absorbed has narrowed to its lowest level since 2021.
A sharp decline in new construction is also reshaping the market. Development activity has fallen nearly 50% between 2024 and 2025 as builders pull back amid high financing costs and tighter lending conditions. While projects already underway continue to add inventory, the shrinking pipeline points to a much thinner wave of new supply in 2026 and 2027.
Rents are climbing as supply slows. Average multifamily rents have increased 0.9% year-to-date to $2.28 per square foot, marking the strongest rent growth since 2022. Coastal markets—including Boston, New York, Los Angeles and San Francisco—are posting above-average gains, while Sun Belt metros with higher construction volumes, such as Austin, Phoenix, Dallas–Fort Worth, and Orlando, are seeing downward pricing pressure. Avison Young projects rent growth will continue accelerating next year, particularly in constrained markets.
National occupancy has risen to nearly 91%, the first increase since 2021, suggesting the sector may have hit bottom in early 2024. If occupancy continues to improve, moderate rent growth could extend into 2026.
Investment activity is also gaining traction. With Treasury yields dropping to 4.16% during the third quarter, multifamily sales volumes reached their highest level since 2022. The sector remains a favorite among investors, with nearly two-thirds of dry powder targeting multifamily assets, the report noted.
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