Potential Headwinds for the U.S. Apartment Market in 2025

Although 2025 is poised to be another strong year for apartment demand, the outlook isn’t absent risk. Some in-place and potentially emergent headwinds may result in downside pressure this year.

1. Continued Supply Pressure

There are many markets where supply (trailing 12-month deliveries) has either peaked or is expected to peak in the first few months of 2025. Still, this isn’t true for all markets, and there are some markets where the duration of supply pressure may persist longer, both in terms of peak timing and sheer volume. Markets that exhibit a longer duration of supply pressure (whether in terms of timing, volume, or both) are expected to underperform the broader market though 2025.

By 2026, there may be a reprieve in supply pressure however as new starts and total construction volumes are down roughly 30% to 60% in most markets, according to RealPage Market Analytics.

[Related: Read our coverage of multifamily permits and starts data here.]

2. More Frequent Concession Utilization

While concession utilization remains below early 2010s standards, the nation has seen the number of units offering a concession increase in recent quarters. This isn’t currently a large influence for existing assets (roughly 14% of units offering a discount). Should concessions increase that would serve as a potential headwind in the coming months.

Concession utilization runs higher, however, in lease-up assets. Nearly three-in-four units in lease-up today are offering at least one month free. By comparison, just half of lease-up units offered at least one month free as of 2019. Further, nearly 20% of lease-up units were offering about two months free at the end of 2024 – a threefold increase to 2019 levels.

3. Risk of Increased Turnover Due to Concessions and Rent Roll Inversion

An increase in concessions could spur an uptick in renter turnover as renters seek discounted apartment units. An uptick in retention, meanwhile, means demand would require an equal uptick in new lease traffic to offset increased retention (requiring an even larger increase in traffic to offset the supply pressure).

Additionally, in some markets, renewal rent values are higher than that of new lease rents. This inversion means turnover could increase even further. This would be a key factor in markets with a combination of supply pressure and lower-than-usual occupancy rates heading into 2025.

4. Markets Where Occupancy is Trailing Historically Normal Levels

Though occupancy improved in most markets in 2024, occupancy continues to trail historically normal levels in many high-supply markets. These markets may see operators focus on occupancy preservation through the coming months in an effort to stabilize assets around more normal levels.