Resilient Demand and Still-Muted Rent Growth Defines U.S. Apartment Market in 2nd Quarter 2025

The U.S. absorbed an astonishing volume of apartment units in the year-ending 2nd quarter.

“If there is a single word that can be assigned to the national apartment market as of mid-year 2025, then that word is resilient,” RealPage Chief Economist Carl Whitaker said. “A noisy economic backdrop including slowing (though above expected levels) job growth, declining consumer and business sentiment, and deeply entrenched uncertainty have yet to deteriorate demand for rental housing. And while headline rent growth may suggest fundamentally weak demand at first glance, the U.S. apartment market's ability to churn out exceptional demand amid the record supply wave remains a defining storyline for the industry."

Over 227,000 units absorbed in the April to June period, a very strong reading for any 2nd quarter that pushed annual demand to above even the record tally seen during the demand boom of 2021 and early 2022.

That record absorption load was met with rapidly declining delivery volumes. Over 535,000 units were completed across the U.S. in the last year, including over 108,000 units in 2nd quarter alone. While that annual completion volume easily stands above the nation’s long-term average, it comes in below the all-time high from the previous two quarters.

Heads-In-Beds Strategy Prevails

Rent growth at the mid-year point registered weaker than expected for some as rents grew a mild 0.19% in the month of June. Bigger picture, though, the readings falling into the annual rent calculations are still roughly matching the readings falling out, essentially replacing like with like for annual rent change.

One thing that’s different, though, is that occupancy has steadily ticked up over the last year. Ergo, a modest rent reading appeared to support the idea that operators are preserving occupancy at the expense of rent growth, opting to fill units over pushing prices higher.

Nationwide, occupancy registered at 95.6% in June, a negligible 0.09-basis point (bps) decline from May’s reading. Still, occupancy has improved 140 bps year-over-year and also trended up in all of the nation’s 50 largest apartment markets.

In the South region, in particular, occupancy climbed 160 bps in the year-ending June, while rents were still cut 1.1% on an annual basis.

As operators are laser-focused on filling units in the coming months, concession utilization could become even more prevalent, making true rent growth harder to realize until discounts burn off.

Renewal conversion continued to trend up, hovering at 55.1% of leases renewed in the year-ending June, up about 2% year-over-year.

Markets Gaining Momentum

Tech-heavy coastal markets, especially San Francisco and San Jose, but also New York and Boston, gained some momentum in apartment fundamentals in 2nd quarter, perhaps linked to return-to-office mandates and waning supply volumes. Similarly, a small handful of Sun Belt markets, including Dallas, Atlanta and Jacksonville, appeared to turn a corner in 2nd quarter by maintaining sky-high demand amid declining deliveries.

Tourism Markets Falter

Meanwhile, markets that depend more on tourism, such as Las Vegas, Orlando, Nashville and San Diego lost a bit of momentum in 2nd quarter. Softness in tourism-dependent markets can sometimes be the first sign of economic weakness as consumers tighten discretionary spending, such as on travel and vacations.

Additionally, markets with an outsized influence on external factors, such as Washington, DC and Baltimore (government jobs), Houston (oil) and Riverside (imports) showed some softness compared to recent quarters.

The usual suspects of supply-heavy markets continued to dominate the list of markets with the deepest rent cuts, including in Austin, Denver, Phoenix and San Antonio.