Healthy 1st Quarter Demand Boosts Rent Growth as Supply Ebbs

U.S. apartment demand registered well above average in 1st quarter 2025, which helped boost fundamentals back toward more normal readings. At the same time, the nation’s once-in-a-generation apartment supply wave ebbed slightly, indicating that the impacts of high supply will begin to pull back throughout the remainder of the year.

In the January to March quarter, the U.S. absorbed over 138,000 market rate apartment units, marking the highest 1st quarter demand on record in the RealPage data set, which goes back over 30 years. Strong 1st quarter demand was coupled with robust readings from the last three quarters of 2024 to register at a record annual rate of nearly 708,000 units absorbed nationwide, according to data from RealPage Market Analytics. That annual rate registered essentially in line with absorption from the demand boom of early 2022.

Demand registered above concurrent supply as the nation delivered nearly 577,000 apartment units in the year-ending 1st quarter. That rate marked the highest supply volume in 50+ years, outside of last quarter’s record high of about 589,000 units. In the coming quarter, the annual supply volume is forecasted to come down even more, further indicating that the supply wave has crested.

Occupancy continued to tick up modestly throughout the early months of 2025 to stand at 95.2% in March. This was the highest reading seen since October 2022, but still essentially in line with long-term norms.

As supply and demand trended toward a more balanced relationship after several years of changeable readings, rent growth continued to build modest momentum. Effective rents grew 0.75% in March. In turn, effective rents grew 1.1% in the year-ending March 2025, which marked the highest reading since June 2023.

Rent growth, however, was not uniform nationwide. Rents continued to grow most in the Midwest and Rust Belt regions of the country, with the highest annual growth rates seen in Kansas City, Chicago and Pittsburgh.

Conversely, rents continued to be cut most in the Sun Belt region and, in particular, high-supply markets, such as Austin and Phoenix. Still, on a monthly basis, every single one of the nation’s 50 largest apartment markets posted rent hikes, with the most moderate increases seen in in West Palm Beach, Tampa and Los Angeles. Even in the markets where rents are being cut most deeply, monthly rent growth in March indicates that momentum will likely build throughout prime leasing season.

Finally, economic measures present mixed indicators for the multifamily industry. Employment has been steady and growing, but at a less robust pace of late. Consumer confidence remains under pressure. Inflation is still being tamed. And uncertainty as to how tariffs will impact both consumers and the industry remain to be fully understood.