Updated RealPage Forecast Indicates Strong Demand, More Mild Rent Growth

Editor's note: This article was updated on October 16 to reflect more accurate data calculations by RealPage.

After starting the quarter below its long-term average, employment ended September on a high note, with an increase of nearly 254,000 jobs. This brings the total number of jobs created in the first nine months of the year to 1.8 million, which is 24% below the level seen during the same period last year. As inflation has been on a downward trajectory for some time now, average hourly earnings have been gaining lately, increasing 4% on an annual basis in September, indicating that real wages are moving up too.

These recent developments have reflected positively on demand for apartments, as absorption during 3rd quarter topped 192,000 units, bringing the total number of units absorbed so far in 2024 to over 488,000. We believe that strong demand will continue well into 2025, rising about 5% above the 2024 level, according to RealPage. Supply, on the other hand, is expected to remain high in the next 12 months. As of 3rd quarter 2024, our pipeline indicated that just under 600,000 units were expected to be delivered in 2024. Though it is too early to see the immediate effects, the interest rate cut already delivered by the Fed, and those that will occur in the immediate future, will be reflected on the supply side as we move into 2025.

Robust supply has caused rent cuts in many metros. As a result, 68% of the top 50 markets saw their rent forecasts downgraded in 2024, while only 18% of markets saw their forecasts upgraded. For 2025, 30% of the markets will see upgraded rent forecasts, while 42% will see downgraded forecasts. For 28% of the top markets, the 2025 forecast did not change. Due to changes in the business and economic environment, our updated forecast shows that 36% of the top 50 markets will experience annual rent cuts in 4th quarter. Meanwhile, half of these markets are expected to see mild rent growth between 1% and 3%. Only a few markets will end the year with rent growth exceeding 3%. As supply begins to slow in 2025, nearly half the top 50 markets are projected to see rent growth between 2% and 3%, with over 35% experiencing rent growth above 3%.

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