As seen in CoStar
Balance of supply and demand narrows to smallest gap since 2021
National multifamily rent growth slowed slightly to close out 2024 following a seasonal slump in apartment demand and a sustained surge in new supply.
Yearly rent growth ended the fourth quarter at 1%, a softening of 40 basis points compared to the end of the third quarter, per a report on the U.S. rental market released by Apartments.com, a division of CoStar Group, which publishes CoStar News. The slowdown marked the second consecutive quarterly decline in asking rents.
National yearly rent growth has hovered near 1% since the middle of 2023 after rapidly decelerating from highs in 2021 and 2022 that reached beyond 9.5%. The asking rent level ended 2024 at $1,729, an increase of 90 basis points from the end of 2023.
“The pullback in landlords’ ability to raise rents is directly tied to the large amount of new supply outpacing demand,” Jay Lybik, national director of multifamily analytics for CoStar Group, said in an email. “While national rent growth may remain below 1% into 2025, reduced levels of apartment completions, combined with the strong demand from renters, could set the stage for rent hikes to begin accelerating.”
Since the first quarter of 2021, new supply has outpaced move-ins, according to the report. But the market is showing signs of shifting, as the final quarter of 2024 registered the smallest gap between supply and demand over that period. The convergence suggests more balanced market conditions are on the horizon.
Move-ins outpaced move-outs in the fourth quarter by 113,200 units, a decline in demand compared to the third quarter and the second consecutive quarter of easing. New supply counts included 133,300 unit openings, stretching the streak of supply outpacing demand to 16 consecutive quarters.
The continued mismatch in supply and demand combined to produce an 8% national vacancy rate. The level has remained relatively stable throughout the year, rising 20 basis points since the first quarter of 2024. But despite elevated deliveries that reached generational highs in 2024, the past year also represented a surge in demand with full-year move-ins outpacing move-outs by 556,800 units — a 70% increase over 2023.
Midwest outperforms
The year’s strong demand helped bolster rent growth in markets that avoided record supply gains. That story is particularly true in the Midwest where several areas outpaced rent growth nationally. Detroit led the Apartments.com report’s top 50 major metropolitan areas in fourth-quarter rent growth with a 3.2% expansion in asking rents.
Five of the top 10 fastest-growing areas for rent growth were located in the Midwest, including Kansas City, where asking rents rose 3%, and Cleveland, which saw a 2.8% expansion in rents. Pittsburgh as well as Columbus, Ohio saw rent growth above 2.5%, according to the report.
Areas in the Sun Belt, where much of 2024’s new supply was concentrated, struggled. Eight of the 10 weakest-performing markets were located in the region, including Austin, Texas, that once again led major metropolitan areas in rent declines. The area saw a 4.8% decrease in annual asking rents far outpacing Denver, which saw the second-highest rate of declines at 2.9%.
San Antonio; Jacksonville, Tennessee; and Phoenix also saw significant declines in asking rents ranging from 2.1% to 2.4%.
Demand was highest for Class A, luxury developments with more than 429,000 move-ins relative to move-outs in the fourth quarter. But with the majority of supply focused on the segment, rent growth among high-end apartments underperformed, growing 20 basis points since 2023 with a vacancy rate just under 11.5%.
Mid-priced apartments outperformed the national market with a 1.3% expansion in annual asking rents and a 7.3% vacancy rate. The report cited improving consumer confidence, lower inflation and sustained economic growth as contributing to demand for the price point.
