The tenants have quietly enjoyed a nice difference over the past two years. A historical wave of construction apartments has reduced rents from their climax in the era Tenants. A economist announced housing until 2025 “the year of the resident.”
But with the increase in the cost of construction, the number of cranes on the horizon diminishes. The formerly enthusiastic developers abandon fresh construction plans, laying the foundation for another apartment pressure. In other words, the good times of the tenants are exhausted.
Time is not only yet. It is expected that developers will present half a million new apartments this year, a slight decrease from 2024, which must force real estate managers to focus on keeping their buildings full instead of raising rents. Nevertheless, the expectations of the tenants turn into depression as soon as you look at the year 2026 and beyond. The offer has flourished apartments over the past few years, but the demand has continued – there is no abundance of empty units. The construction pipeline has decreased significantly since the days of the glory of cheap money, when it was easier for developers to secure loans for new projects. While many rents opened their doors in 2024, construction companies in apartments are based on the lowest number of units in more than a decade.
“The inventory available to rented housing units may be tightened,” says a recent report from RealPage, a software company that helps real estate owners to set their rents. Yardi Matrix 2025 real estate analysis company was distinguished by a “year fraught with change”.
Translation: These deals are disrupted as the apartment while you can. Maybe they will not last longer.
The past few years have been chaotic for apartments. The demand for apartments increased in 2021 with the upgrade of the tenants to larger places, moved from their parents ’homes, or goodbye to his room colleagues in favor of individual living. This increase in “family formation” pushed the rents even when people criticized the crowded cities to the homes of one family in the suburbs. Zillow was found that the apartment rents rose by more than 20 % at the national level from 2020 to 2022. At the same time, the developers were putting the stage due to the reflection. At some point in 2022, more than a million new housing units were under construction throughout the country. The rush has been from the new Builds over the past two years: According to RealPage, developers have opened a total of 440,000 units in 2023 and recorded 588,900 last year, where 500,000 others are expected to become available in 2025.
All of these new buildings have kept the prices at the choice. “They did what the offer is supposed to do,” says Jay Parsons, economist Jay Parsons. With a lot of new units in the market, the tenants have more options and less likely to tolerance with sharp rental rises. Yardi Matrix data indicates that rental growth on an annual basis has remained less than 1 % over the past 16 months, that is, much lower and keeping tenants – they have returned to fashion. At the end of 2024, approximately 13 % of the units throughout the country were making concessions, which are very close to the high levels of the first months of the epidemic, when no one wants to move.
Building apartments tends to be a very periodic means, and I do not think this is great for tenants or investors.
All types of tenants – not only observers who can withstand the costs of the latest and largest apartment building – have benefited from this development boom. The owners usually make concessions when they try to rent new buildings, most of which are classified as “luxurious” these days. But even long -term buildings with cheaper apartments offer free gifts to prevent tenants from fleeing for the most green pastures.
“It is just a simple game of supply and demand,” says Karl Whitaker, Senior Economist in RealPage. “With more offer, you should draw more traffic to your property, and this comes with these incentives.”
The problem of tenants is that real estate managers may soon find these unnecessary efforts. The developers depend greatly on debts to finance new projects, and has made high interest rates in the federal reserve reserves that loans is much more expensive, which prompted a decrease in construction plans. The builders have been deterred by the next new show wave to the market and the possibility of growth in rent in their property. By doing this, they laid the foundation for another apartment shortage – and to get rents in climbing again.
“The pendulum swings greatly,” says Barsons. “Unfortunately, building apartments tends to be a very periodic means, and I do not think this is great for tenants or investors.”
The prediction of fluctuations and turns of the economy may be difficult, but the prediction of the supply of the new association is clear and direct. If you know the number of units under construction today, you can reasonably estimate the new offer within a few years. These numbers indicate a seismic shift in the rented scene. The construction of apartments last year decreased to the lowest level since 2013, for each bag. This slowdown will soon begin to appear in the number of new apartments coming to the market. Yardi Matrix 524,000 is expected to deliver in 2025, but only 414,000 in 2026 and 341,000 the following year. RealPage expects a sharp decrease, from 470,000 new units this year to 265,000 in 2026, with another drop in the following year. Christopher Bruyne, an economist in the National Multile Family Housing Council, wrote last year that this decline “is likely to exacerbate the lack of housing in our nation in the long run.”
American cities will not feel the effects of this withdrawal evenly. Most of the apartments built during this renaissance of construction are located in the lower half of the country – Austin, Atlanta, Phenix and Houston, among others. Some metro in the mountain area, such as Denver and Solt Lake City, welcomed many new apartments. The rents in these markets may be slower again, but the demand for housing in these areas was also higher than other places throughout the country, and thus the relative relief may be short -term. As for the major coastal markets such as New York, Boston, Seattle and San Francisco, it makes the availability of lands and allows obstacles that are already difficult to build apartments, it may be more strict for tenants. In a recent profit call with investors, an executive of Equity Resident, one of the country’s largest apartment owners, described the offer as “more dramatic” in these markets, as the beginnings decreased by 30 % in 2023 and about 60 % in 2024.
“With the expectations of 2025, we are expected to decrease again, we expect one of the best balances and demand in our coastal markets that we have seen very long.”
One complex factor is the delay of construction. The expected completion in 2025 may bleed until 2026 until 2027 due to the supply chain holidays or employment deficiency, which reduces pain for tenants. The company expects the rents to increase by 1.5 % this year, by 1.1 % in 2026, then by 3.3 % in 2027. Parsons expects greater annual growth, in “medium numbers”, starting from 2026. This type of increase. It is far from the high rent in the era of the epidemic, but it still means the end of this era full of privilege for the tenants.
It took a perfect storm of factors to push this huge construction mutation. Now a lot of these factors have just disappeared.
If the demand for apartments really picks up – then, for example, people feel an improvement in their economic horizons or decide that the rent will get more uproar for the buck of purchase – the growth of the rent may rise. Whitaker told me that it is still very early in the year knowledge of the number of tenants who will search for new units during the summer months, but there are already signs that this year may be hotter than the past. In both November and December, traffic rental movement – the number of potential tenants who check the new apartments – increased from the previous year. This might seem to be HOM, but this was the first time since early 2022 that has achieved traffic rental for two consecutive months of growth on an annual basis.
“My interpretation is that we will see a lot of demand this summer,” says Whitker.
Are we governed by repeating these courses, waiting for any few relief to be revealed as a mirage? Parsons does not think that. It refers to a national construction fund – which can provide cheaper debts for developers, so it is unlikely to decline when interest rates rise – as a solution from the two parties that can enjoy this rented roller ship. In the absence of the tenants staring at another rough journey.
“It took a perfect storm of factors to lead this huge construction boom,” says Lee Parsons. “Now a lot of these factors have just disappeared.”
James Rodriguez He is a great reporter in the Business Insider.
