Apartments 2025: Record Rent Drops Hit Major Cities—Is Now the Time to Move?

Key takeaways at a glance • National median apartment rent rose 0.4 % in May 2025, the third monthly uptick in a row, according to Apartment List’s National Rent Report. • Supply is finally catching up: nearly 560,000 new multifamily units are slated to deliver this year— the biggest wave since the 1980s. • Rents are falling year-over-year in 28 large metros, from Austin to Atlanta, as a construction boom collides with softer demand, Redfin data show. • Studio apartments are seeing the sharpest increases (-5.9 % projected for 2025) while three-bedroom units are flat, pointing to renewed interest in urban living. The post-pandemic apartment market is entering a new era After four years of whiplash— record spikes in 2021, a plateau in 2023, and modest declines through early 2024— the rental market is stabilizing. Nationally, rents are now just 0.7 % above their year-ago level, but the story on the ground depends on where you look. Sun Belt cool-down puts renters in the driver’s seat Phoenix, Austin, Jacksonville and Atlanta were poster children for runaway rent growth during the remote-work migration. That momentum has reversed: each city recorded double-digit inventory growth in the past 12 months, sending vacancies to a three-year high and pushing effective rents down 3-5 %. Lease-up concessions such as two free months and reduced security deposits are common as owners race to fill shiny new Class-A towers. Old-guard metros make a comeback Coastal hubs that lost residents in 2020—New York, Boston and San Francisco—are back in favor. Office-return mandates and a resurgent job market in tech and finance have squeezed vacancy rates below 4 %, their tightest reading since 2019. In Manhattan, average effective rent topped $4,300, eclipsing the pre-pandemic record set last summer. Studios and one-bedrooms are leading the charge as Gen Z workers trade remote leases for doorman buildings near the office. Suburban “build-to-rent” reshapes the three-bedroom segment Families priced out of the for-sale market are fueling demand for professionally managed single-family rentals (SFRs) across the Midwest and Southeast. While traditional garden-style apartments posted a 0.2 % quarterly gain, institutional SFR portfolios notched a 2.1 % increase, highlighting a bifurcation between product types. Expect more horizontal apartment communities— rows of detached cottages with shared amenities— to break ground as developers chase this sticky, higher-rent demographic. Affordability pressures persist despite softer growth Even with cooling headlines, the typical renter now spends 30.2 % of household income on housing, above the widely accepted 30 % affordability threshold. Wage growth has moderated to 3.8 % while asking rents, though slowing, still outpace earnings in many metros. Policy makers are responding with record levels of LIHTC allocations and a flurry of local “missing-middle” zoning reforms aimed at boosting mid-rise density. What to watch in the second half of 2025 1. Absorption vs. deliveries: More than half of 2025’s new inventory hits the market between July and December. If leasing can’t keep pace, national rents could slip again by Q4. 2. Interest-rate pivot: A Fed rate cut would revive multifamily transaction volume, giving debt-burdened owners a lifeline and potentially slowing the flow of distressed assets to the market. 3. Remote-work wildcard: Any broad corporate rollback of hybrid policies would further tighten core downtown submarkets while adding slack to smaller metros that benefited from migration waves. Bottom line The apartment sector is shifting from a landlord’s market to a balanced playing field. Renters in over-supplied metros have newfound leverage, while gateway cities remind everyone why location still commands a premium. For investors, underwriting discipline and sub-market selection are paramount. For tenants, the next six months may be the best window in years to negotiate concessions before the supply glut clears and the cycle turns yet again.