The US multifamily market is showing promising signs of recovery. For the first time in three years, vacancy rates for U.S. apartments are stabilizing as demand ramps up, potentially signaling rent increases on the horizon.

Vacancies Stabilize: After years of high vacancies due to a construction boom, the apartment market is regaining stability. CoStar reports that demand is now the highest since 2021, filling over 1.2 million new units. National vacancy rates hover around 6.6%, a slight dip from recent peaks.

Supply Constraints Tighten the Market: Apartment construction is expected to slow in the coming years, likely creating tighter rental conditions. By the end of 2024, around 672,000 new units are projected to be completed, with just 336,000 expected for 2025. This significant drop in new units could give landlords more pricing power in the next cycle.

Expert Insight:

“Barring an unforeseen black swan event, it seems the near-consensus view—a rebound in fundamentals following the supply peak—is beginning to take shape,” said Jay Parsons, a Texas-based rental housing economist. “It serves as a reminder that supply pressures have been the primary challenge for apartment investors, and these pressures are typically both predictable and temporary.”

Investment Sales Rebound: Apartment building sales are also on the rise, with two consecutive quarters of growth, according to MSCI Real Assets. Sales are particularly strong in markets like Denver, San Francisco, and Washington, D.C. suburbs, where sellers are adjusting prices to reflect current conditions.

Regional Rent Growth: Rent patterns vary across regions, with cities like New York, Los Angeles, and Indianapolis seeing renewal rent increases of over 5%. Conversely, Austin, Texas, where vacancies top 15% due to rapid construction, faces rent stagnation, forcing landlords to offer concessions.

Tight conditions in the housing market are keeping many renters from moving into homeownership, a trend likely to persist into 2025. High interest rates and unaffordable home prices mean that fewer renters are leaving the rental market, helping sustain demand for apartments.

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