Navigating the 2025 Rental Market: 7 Key Predictions for Multifamily Professionals

The multifamily rental market is entering a pivotal phase of transformation. As we approach 2025, multifamily professionals find themselves at a critical juncture, where strategic foresight can mean the difference between surviving or thriving in an increasingly competitive landscape.

Drawing from Apartment List's latest December Monthly Rental Insights Webinar, led by our Chief Economist Igor Popov, this comprehensive analysis offers an indispensable roadmap for multifamily professionals. These predictions aren't just forecasts, they're strategic insights designed to empower property teams to make informed, proactive decisions.

Where's the Market at Currently?

Key Rental Market Indicators

1. National Rent Index November's data reveals a nuanced picture of market conditions that multifamily professionals must carefully understand – despite robust demand, a wave of new housing supply has kept rents in check.

• Month-over-Month Change: -0.8%
• Year-over-Year Change: -0.6%
• Median Rent: $1,382
• First entirely negative YoY rent growth period in Apartment List's rental index history.

"We haven't seen any month in 2024 where rents were at or higher than they were a year prior," Igor noted. While rents remain significantly higher than pre-pandemic levels, the market has hit a notable plateau, signaling a return to more normalized conditions.

2. National Vacancy Index
The current national vacancy rate (6.8%) reflects a return to summer 2020 pandemic-era levels. "We've seen gradual easing essentially for three years straight," Igor explained, highlighting the market's ongoing recalibration.

Regional Market Variations

In the Sunbelt and Mountain West, markets are experiencing the most significant challenges, with steep rent declines in key cities like Austin, Raleigh, Jacksonville, Salt Lake City, and Dallas. These markets are characterized by high construction rates and intense competition.

Conversely, the Midwest and Northeast are showing remarkable resilience. Cities such as Cleveland, Kansas City, Louisville, and Detroit are experiencing strong rent growth, driven by more measured construction and stable local economies.

Renter Search Trends: A Deeper Dive

Next, we’ll examine changes in renter search behavior. Please note, the following insights are based on renter searches conducted on our platform.

The Rise of Opportunistic Searching

Igor noted a phenomenon of increased "low urgency" searches. Renters are taking a more strategic, opportunity-driven approach indicating a more cautious rental market. These renters are less pressured by immediate housing needs and potentially waiting for more favorable market conditions.

Budget Considerations

Renters are bringing increasingly robust financial resources to their searches. "Budgets have grown quite a bit, approximately 15 to 20% higher than a few years ago," Igor observed. This growth reflects cumulative rent increases, changing economic expectations, and increased financial flexibility for some renters.

Lease Preference Shifts

Renters are reimagining their ideal living situations with notable shifts in unit size, roommate preferences, and lease flexibility. Key trends include a growing preference for smaller living spaces (studio and one-bedroom units) and increased appetite for lease flexibility.

Short-term lease interest has nearly doubled from 8-9% to 12-13%, indicating a desire for adaptability and uncertainty about long-term commitments. "There's probably a story here about opportunistic searches and uncertainty that some of these renters are experiencing," Igor noted.

7 Key Predictions for the 2025 Rental Market

We've identified the following seven key trends that will shape the rental landscape in the coming year.

Prediction 1: We Still Ride the Supply Wave

"We are still going to be riding this wave of new supply hitting the market," explained Igor, pointing to approximately 800,000 units currently under construction nationwide. While this represents a decline from the peak of 1 million units in early 2024, it's still historically significant – nearly double the 400,000-unit pipeline from a decade ago.

What does this mean for your properties? Expect the competitive leasing environment to continue through most of 2025, with vacancy rates likely peaking in Q3-Q4. Property managers should:

• Maintain competitive pricing strategies.
• Be prepared to offer strategic concessions, particularly in markets with high new supply.
• Focus on retention strategies for existing residents.

Prediction 2: Vacancies Peak

"Once this current supply wave crests, there's not going to be another one following it," Igor predicted. He explained why: "Right now the units that are hitting the market, the new lease ups, those are projects that broke ground back when interest rates were low and the housing boom was in full swing... we aren't starting new developments in the same way."

This shift means that "properties will have some pricing power back to grow rents probably by the time we're exiting 2025," according to Igor.

For property teams, this signals several strategic opportunities:

• Expect pricing power to gradually return by late 2025.
• Plan for reduced competitive pressure from new lease-ups as we exit 2025.
• Position your properties now for stronger performance as the market stabilizes.

Prediction 3: Preference for Suburbanization Continues

The "donut effect" that emerged during the pandemic isn't just persisting, it's becoming a defining feature of the 2020s rental market. Data shows consistently stronger rent growth in suburban areas compared to urban cores, driven by three key factors:

1. Demographic shifts as millennials enter prime family-formation years.
2. The permanence of remote and hybrid work arrangements.
3. Technological advances that make suburban living more convenient.

For property teams, this trend requires strategic adaptation. For example, if you manage suburban properties, capitalize on this momentum by highlighting community features and family-friendly amenities.

Prediction 4: CPI Rents (Finally!) Normalize

A significant change is coming in how rental costs impact inflation measurements. As Igor explained, "By the time we come out of 2025, [CPI] rents will actually come down, taking a lot of pressure off inflationary measurements."

This shift reflects a complex dynamic between market reality and official measurements. "We see market rents adjust daily, and we can track that in real time," Igor noted, "but when we measure rents for the purposes of understanding inflation... we take surveys of what renters are paying and what renters are paying does not change every day like the market does."

For property teams, this shift has important implications:

• Expect more stable economic conditions as rental inflation normalizes.
• Anticipate potential positive impacts on consumer confidence.
• Consider how this might influence Federal Reserve policy and, by extension, financing costs.

Prediction 5: Interest Rates Fall, But Renting Remains Attractive

While mortgage rates are expected to decrease in 2025, don't expect a return to the ultra-low rates of recent years. According to Igor, "Mortgage rates will fall, but not fall dramatically enough to bring home buyers back into a low interest rate frenzy market."

"Most forecasts are putting 2025 exit mortgage rates kind of in the five and a half to 6% range," Igor explained, adding that "home buying will continue to be a real challenge for first time home buyers given where mortgage rates will continue to be in 2025."

This creates a unique opportunity for property teams:

• Continue targeting would-be homebuyers, particularly affluent millennials.
• Emphasize the flexibility and financial benefits of renting.
• Consider longer-term lease options for stable renters.
• Develop marketing strategies that speak to delayed homeownership.

Prediction 6: Competition from Outside of Multifamily Increases

The competitive landscape is becoming more complex. "Multifamily is continuing to see increased competition from nearby sectors," Igor warned. This isn't just about traditional competitors, it's about fundamental changes in the housing market.

Particularly notable is what Igor calls the "shadow market" – "The amount of opportunities that younger adults have today to live at home with their parents is growing, not just because they're facing affordability challenges in the market, but also because they're actually a tremendous number of spare bedrooms that older Americans in larger homes with smaller households are sitting on."

Property teams need to prepare for competition from:

• Growing short-term rental inventory.
• Expanding build-for-rent single-family communities.
• The "shadow market" of adult children living with parents.
• New housing alternatives that may emerge.

Prediction 7: AI Gets “Arms and Legs”

The rental market isn't just facing changing economic conditions, it's experiencing a technological transformation. Looking ahead to 2025, Igor noted that "we won't just be exiting 2025 with a different set of market conditions, but also with a different set of technological capabilities."

The evolution of AI and other technologies will dramatically impact how renters search for and secure housing. "Pretty soon we'll be to a point where AI really gets kind of arms and legs," Igor predicted. "Right now, it's been a big brain that could kind of write for us and think for us when we want, but we haven't really given it the agency to go out and act independently in the world."

For property teams, this means:

• Preparing for AI-driven leasing processes.
• Adapting to new renter search and decision-making patterns.
• Investing in technology that enhances the resident experience.
• Staying ahead of emerging proptech trends.

Apartment List, Your Partner in Navigating the 2025 Rental Landscape

While 2025 will present its share of challenges, it will also offer significant opportunities for property managers who stay ahead of these trends. As Igor said, "I think 2025 will be another fascinating, in some ways, challenging in some ways – opportunistically exciting year."

The key to success will be adaptability. From the cresting supply wave to the evolution of AI, staying informed and nimble will be crucial. Apartment List's smart leasing platform and AI sales consultant, Lea Pro, can help property teams optimize their leasing operations and resident experience for whatever comes next.

Ready to get ahead? Contact our team today to learn how Apartment List's suite of smart leasing solutions can help your properties thrive in 2025 and beyond.