The multifamily housing market showed strong absorption in 2024, with 436,000 units absorbed—72% higher than in 2023. Despite a record 530,000 new apartments, vacancies remained below 10%. Construction is slowing, with new starts at the lowest level since 2012. Demand remains high, keeping rents stable. In 2025, supply constraints and tech-driven efficiencies will shape the sector’s recovery.
Key Takeaways in Q4
2024 saw exceptional multifamily absorption, with over 436,000 units absorbed—a 72% jump from 2023 and 56% above pre-pandemic levels (2017-2019). All 90 tracked markets recorded more move-ins than move-outs, with the Sun Belt leading the charge.
A record number of new apartments hit the market in 2024, raising vacancies by 40 basis points despite strong demand. The national vacancy rate reached 8.9% in Q4, the highest since 2000, driven by the delivery of over 530,000 new units throughout the year.
Construction risk is declining rapidly, with activity down 40% from its peak and new starts at 230,000, the lowest since 2012. High interest rates, slower rent growth, and rising costs are restricting new development. With most projects slated for 2028 already underway, a tighter supply is expected over the next three to four years.
Absorption Kept Vacancies Below 10% in 2024
2024 marked the second-strongest year for multifamily absorption in over two decades, trailing only 2021 by 20%. Despite 530,000+ new deliveries (+16% YoY), strong demand kept vacancies in single digits. Had absorption matched the 2017-2019 average (278,000 units), the vacancy rate would have hit 10.1%—160 bps higher than the actual rate.
Rising renter household formation helped stabilize vacancies, with the stabilized rate ticking up just 20 bps to 6.7%—suggesting most of the increase came from new supply. The South led the absorption wave, accounting for over half of the 430,000 units absorbed, with Dallas/Ft. Worth (30,000), New York (25,000), Austin (22,000), and Atlanta (21,000) topping the list. These same markets also led in new deliveries, with Dallas (41,000), Austin (32,000), New York (28,000), and Atlanta (25,000).
Resilient Rent Growth Amid Supply Surge
Despite a wave of new deliveries, rent growth remains steady, fluctuating between 1.5% and 2.0% since mid-2023. Fierce competition for renters has led to increased concessions in stabilized properties near new developments. While rent growth has slightly improved from last year’s low, it still lags the 2010-2019 average of 3.7%.
Regional trends vary: The South (1.0%) and West (1.4%) continue to see muted growth, with Austin, Denver, and Phoenix facing rent declines as they absorb excess supply. Meanwhile, Northeast (2.9%) and Midwest (3.8%) markets lead in growth, with Milwaukee (4.8%), Cleveland (4.7%), and Stamford (4.4%) posting the largest YOY rent increases.
Multifamily Supply Wave Has Crested
After 530,000 units delivered in 2024, the construction surge is past its peak. Nationwide, 560,000 units remain under construction, the lowest level since 2018. Developers are scaling back, with only 230,000 units breaking ground—a return to 2012 levels and 30% below pre-pandemic norms (2017-2019: 330,000 units).
With 2025 deliveries expected to be nearly half of 2024’s total, a rapid market recovery is likely. Texas leads in pipeline reductions, with Austin (-25,000 YOY), Dallas/Ft. Worth (-23,000), Houston (-17,500), and San Antonio (-11,000) recording the steepest declines nationwide.
2025 Outlook
Strong Demand Persists Amid Shrinking Supply
The multifamily market will continue to see a supply-demand mismatch, with new construction down 20% in 2024 and expected to decline further in 2025. With fewer new apartments, competition for existing rentals will likely push rents higher.
Affordability challenges in the single-family home market are keeping more people renting, as high mortgage rates make homeownership less attainable. At the same time, population growth in cities like Phoenix, Dallas, and Houston is driving rental demand. As a result, rents are projected to rise by 3% or more in one-third of the top 50 U.S. markets.
Sun Belt Remains a Prime Multifamily Investment Market
The Sun Belt has been a top destination for multifamily investment, thanks to its affordable living, strong job markets, and steady population growth. This momentum is expected to continue in 2025, with cities like Phoenix, Atlanta, and Dallas outperforming other regions.
These markets are drawing both residents and businesses due to their lower cost of living and pro-business environments
Tech and Automation Reshape Multifamily in 2025
Technology will play an even greater role in the multifamily sector in 2025, with property management software, tenant engagement apps, and automation streamlining operations and enhancing the tenant experience - boosting efficiency and cutting costs.
Agentic AI is revolutionizing real estate by analyzing vast data sets in real time, identifying trends and risks, and automating workflows for greater efficiency. Businesses that embrace these solutions will gain a competitive edge in market selection, asset management, and performance optimization.
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