On July 18, 2025, the National Association of Realtors (NAR) released data revealing a notable boost in consumer confidence tied to stabilizing mortgage rates and strong employment figures. This uplift is translating into increased rental activity—particularly in urban, multifamily housing markets. As homebuying remains financially out of reach for many, a surge of renter demand is reshaping apartment dynamics across major metro areas.
Mortgage rates have hovered near the 5.5% mark, offering a sense of relief compared to the 6%–7% range that prevailed earlier this year. Though still elevated by historical standards, this relative stability has encouraged some prospective homeowners to reconsider, slightly easing the long-standing lock-in effect. However, despite growing confidence, elevated housing prices and limited inventory continue to bar many—particularly first-time buyers—from entry.
In 2024, newcomers to homeownership hit a generational low of just over 1.1 million, the lowest since 1989, averaging 38 years old—well above the 27-to-30 range of previous generations. This illustrates the challenge: even with stabilized rates, affordability remains elusive, pushing many into the rental market.
Data from RealPage shows the U.S. apartment market absorbed an impressive 227,000 units in Q2 2025—a record tally surpassing 2021’s boom. Cushman & Wakefield and CBRE further report that absorption—including in Q1—has outpaced new deliveries, driving vacancies down and boosting occupancy rates toward or below long-term averages.
CBRE’s first-quarter analysis noted net absorption of 100,600 units—the strongest Q1 performance since 2000—with vacancy declining to 4.8%, marginally lower than historic norms. Meanwhile, Cushman’s data shows stabilized vacancy at around 5%, with occupancy still climbing year-to-date.
This resilience is underpinned by strong job growth and consumer spending—key metrics that have remained solid even amid macroeconomic headwinds. Notably, tech-heavy coastal markets like San Francisco and New York, alongside Sun Belt cities such as Dallas and Jacksonville, are seeing marked improvements in fundamentals.
Despite buoyant occupancy, headline rent growth has remained modest. RealPage reports June’s rent increase at just 0.19%, a reflection of landlords prioritizing occupancy over rate hikes. Owners are increasingly offering concessions—covering parking, free months, or reduced fees—to maintain high occupancy, especially in markets with newer inventory.
Yet in the most desirable markets, competition is fierce. As the New York Post reports, Manhattan saw an average of 11 prospective renters per apartment in June, with median rents reaching a record $4,625. Similar trends prevail in Miami, Chicago suburbs, and Eastern L.A., where inventory turnover remains tight, leading to rising rents and competitive leasing.
The uptick in demand, combined with constrained supply, is bolstering investor sentiment. According to CRE Daily, 62% of investors now view multifamily as a top-performing asset class—up from 46% in early 2024. CBRE echoed this, noting Q1 2025 multifamily transaction volume reached $28.8 billion—up 33% year-over-year—and accounted for a dominant share of commercial real estate investment.
This confidence is reinforced by lower expectations for new construction. With funding costs high and capital cautious, fewer than 500,000 units remain under construction—the lowest pipeline in nearly a decade. The result is a disciplined rollout of new supply, allowing occupancy and rents to stabilize before further expansion.
The vibrancy in rentals is mirrored by weakness in the single-family home sector. NAR and Reuters report that single-family starts hit an 11-month low in June, with building permits dropping to two-year lows. Homebuilder confidence remains in the low 30s—well below typical benchmarks—and many builders are resorting to incentives and price cuts to entice buyers.
The Harvard Joint Center for Housing Studies paints a stark picture: median home prices have climbed to $441,738 by mid-2025, and mortgage payments average $2,570/month—pushing homeownership out of reach for many renters.
Moody’s economist Mark Zandi warns that persistently high mortgage rates (near 7%) risk dragging the entire economy if not addressed.
For renters, especially those priced out of buying, competition remains fierce. Urban centers, particularly tech hubs and Sun Belt metros, offer limited vacancy and rising rents. Yet concession offerings can offset cost pressure—at least temporarily.
Landlords and investors are poised to benefit. High demand, slow supply, and rising rents in prime markets support returns. Multifamily investment has become a preferred sector amidst broader commercial real estate uncertainty.
Policymakers should note the sustained affordability crisis. High housing costs—both for renters and buyers—are squeezing middle- and lower-income households. The decline of first-time buyers contributes to wealth inequality and diminishes social mobility. Addressing supply through incentives for affordable and workforce housing should be a priority.
True rent growth may be restrained until the current supply surge is fully absorbed. But with minimal new construction, rent and occupancy metrics are likely to trend upward by late 2025 into 2026. Favorable fundamentals—strong household formation, stable employment, and restrained inventory—support this outlook.
Should mortgage rates drift significantly lower—closer to 5%—the single-family market may see renewed activity. However, at present, the rental sector remains the primary beneficiary of today’s housing environment.
Stable mortgage rates near 5.5% are emboldening consumers—but not enough to overcome affordability barriers. Urban renters are competing in tight markets, fueling landlord leverage. Multifamily demand and investment have entered a resilient phase, even as single-family housing falters. Policymakers and developers must act to expand affordable options as long-term affordability challenges persist.