CoStar Group forecasts that as the new apartment supply is absorbed, new data shows there will be an increase in rents in 2025 and 2026, ending the lower prices “many renters have had over the last couple of years as a result of the post-COVID multifamily supply glut,” the company says in a release.
The company, which specializes in real estate analytics and data information, says this is what renters should expect in the coming years. Key indicators, such as the national vacancy rate and construction starts, indicate a coming period of undersupply.
Jay Lybik, CoStar’s national director of multifamily analytics, recently analyzed the rental market outlook in a release and found:
- After declining since Q1 2022, national rents are increasing once again, reflecting the end of oversupply conditions in most markets.
- Rent growth for the latter half of 2024 is expected to match historical averages – around 3.5% – in contrast to the low of 0.9% in Q3 2023.
- Expected multifamily property completions for 2024 total 533,000 units, a 10% decrease from the 40-year high of 588,000 units in 2023.
- These numbers are expected to decrease even further; at the current pace of starts, the 2026 completion forecast sits at just 250,000 units.
- This trend is further reflected in the sharp decline in construction starts, from a high of 210,000 units starting construction in the first quarter of 2022 to just 63,000 units two years later.
- If demand remains at current levels into 2026, the market could transition quickly from oversupplied to undersupplied, causing vacancy rates to drop swiftly and rent growth to accelerate above historical averages.
- Given the long lead times for construction, the market may not be able to respond quickly enough to compensate for the supply shortage, potentially exacerbating the supply and demand situation.
About CoStar
CoStar Group (NASDAQ: CSGP) is a leading provider of online real estate marketplaces and information in the property markets. Founded in 1987, CoStar Group conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of real estate information.