Trends in Rental Pricing

As we approach 2025, the U.S. rental market is exhibiting notable trends that may influence rent prices in the coming year.

Current Rent Trends

As of October 2024, the median asking rent for 0-2 bedroom properties in the top 50 metropolitan areas was $1,720, marking a 0.8% year-over-year decline and a $23 decrease from the previous month. This represents the fifteenth consecutive month of annual rent declines, with the current median rent standing $40 (2.3%) below the August 2022 peak.

Supply Dynamics

The rental market has experienced a significant increase in multifamily completions, with an average seasonally adjusted annual rate of 606,000 units between January and September 2024, up from 445,000 units during the same period in 2023. This surge in supply has contributed to downward pressure on rental prices.

Regional Variations

All four U.S. regions have seen increases in multifamily completions, driven by surges in new starts from prior years. If current trends persist, the rental stock is expected to increase the most in the South (1.5%) by fall 2025, followed by the West (1.2%), Midwest (0.9%), and Northeast (0.7%).

Affordability Considerations

Despite recent declines, the median rent remains $272 (18.8%) higher than in October 2019, roughly aligning with the 22.7% increase in overall consumer prices over the same period. This suggests that while rents have moderated, affordability challenges persist for many renters.

Outlook for 2025

The substantial increase in rental supply is expected to continue influencing the market into 2025. If current trends persist, the rental housing stock is projected to increase by 1.1% to over 49 million units by fall 2025, reaching a level 6.7% higher than the pre-pandemic stock in fall 2019. This expansion may contribute to further stabilization or modest declines in rent prices, particularly in regions with significant increases in supply.

Conclusion

In summary, the U.S. rental market is experiencing a period of adjustment, with increased supply contributing to recent declines in rent prices. As we move into 2025, these trends suggest a potential for continued stabilization in the rental market, though regional variations and ongoing affordability challenges will remain important factors to monitor.