February 2025 Rental Report: Rents Continue to Fall Nationwide, but Upcoming Supply Pinch May End the Trend

Highlights

• For the nineteenth consecutive month, the median asking rent price across the top 50 metropolitan areas of the United States fell on a year-over-year basis.
• Rent slid to $1,691 in February, down slightly from January and down $15 (0.9%) from February 2024.
• Studio unit rent growth, which appeared poised to go positive last month, dropped to -0.8%, consistent with larger units.
• 2024 saw the fewest permits issued nationally for construction of multifamily units since 2017, fewer than even 2020 at the height of the pandemic across the top 50 metros.
• 9 of the top 50 metros are actually experiencing more multifamily permitting than they were over the previous five years at the same time that rents are falling year over year, leading to downward pressure on rent.
• 10 of the top 50 metros are seeing rent growth year over year at the same time that multifamily permitting was down in 2024, leading to upward pressure on rent.

The median asking rent across the 50 largest metropolitan areas in the United States fell again in February, to $1,691. This marks nineteen months in a row in which rent has fallen year over year, this time by 0.9% from February 2024. For over a year and a half, rents have retreated from where they were following the run-up following the COVID-19 pandemic, but that drastic acceleration still leaves American renters paying considerably more than they did before. National rent is 14.4% higher than it was five years ago. The rental market has stabilized, but its recent softness has made building multifamily housing less appealing than it was a few years ago. We will show that 2024 was a down year when it comes to issuing permits for multifamily projects and identify the metros in which the building slowdown will have an outsized impact on rents going forward.

Figure 1: Rents Continue to Slide in February 2025, Remain Down Year Over Year

Studio Rent Trend Consistent With Larger Units Year over Year

Rent for 0-bedroom or studio units tends to be noisier than rent for larger units, but this month studio rent growth basically matched 1- and 2-bedroom unit rent growth year over year at a level just above -1%. This is due to the market stabilizing in a pattern of consistent price retreat. Despite rent growth across unit size converging when compared to one year ago, we see that studio units have had the least rent growth (9.7%) from five years ago and 2-bedroom units have had the most (18.3%). Stronger long-term rent growth for larger units could be attributed to the fact that fewer young renters are becoming first-time homebuyers amid high home prices and high mortgage rates and fewer young people are forming independent households likely living with room mates instead, keeping demand for larger rentals elevated.

Figure 2: Consistent Year over Year Rent Declines Across Unit Sizes

Table 1: National Rents by Unit Size

Federal Employment Metros Show Little Rent Change

Given the tumult in federal employment in recent months, we take a closer look at the 5 metro areas with the highest concentrations of federally-employed workers to identify how mass layoffs and return to office mandates have affected the rental markets. So far, rent is actually up 3.3% year over year in DC and picked up modestly in Oklahoma City and Baltimore. Meanwhile, San Diego is experiencing a sharper rent decline than the national average, down 6.0% year over year as of February 2025, and rents also softened in Virginia Beach. Divergent experiences across these market highlight that conflicting pressures of federal job reductions and return to office mandates are some of several forces impacting the rental market in these areas. This federal employment spotlight will continue in the coming months, so we will be able to see whether rents respond to the conflicting pressures on the federal labor force in these markets uniformly or if other market factors are more dominant.

Weak Year for Multifamily Construction Permitting Will Pinch Rental Supply in the Future

In 2024, just under 294,000 units in projects of 5 units or more were permitted for construction across the 50 largest metropolitan areas in the United States. This represents a major retreat in multifamily construction permitting, no doubt due to the fact that rents were falling year over year throughout 2024. Last year’s level of multifamily permitting for the top 50 metros was even lower than in 2020 at the height of the pandemic, when over 318,000 units were permitted. And now in the most recent new construction data from the Census Bureau, multifamily permitting slid again and remains down 15.7% year over year.

Source: Census Bureau Building Permits Survey

We have shown that builders are responsive to the for-sale market, stepping in to offer smaller and more affordable single family homes when the existing home segment could not. It appears that they are also responsive to the rental market, accelerating multifamily permit activity when rents are rising and pulling back when rents fall. With the future supply of new apartments retreating, though, the current trend of falling rents may not be sustained. We expect rents to start to grow again in the coming years as the pace of new units hitting the market slows.

Much like rent price trends, the national story is not necessarily the local story. Some of the metros studied have seen multifamily permitting actually increase in 2024 relative to previous years, and some of those metros are currently seeing rents fall. Where demand is already weakening and supply is expanding, we anticipate more significant downward pressure on rents. These metros can be found in the bottom right quadrant of the scatter plot below. Conversely, in some metros that are following the national trend of fewer units being permitted at the same time that rents are going up, we anticipate significant upward pressure on rents. Look to the top left quadrant of the scatter plot for metros where we expect rents to continue to grow.

On the whole, a majority (31) of the 50-largest metro areas fall into quadrants that suggest market forces are working as expected. They are in areas where rents are rising and permit activity is elevated or, more commonly, where rents are falling and permit activity is also lower than in the recent past. But 19 markets fall in quadrants that suggest market changes are likely. Nine of the top 50 metros saw more multifamily permitting than over the previous five years at the same time that rents fell year over year suggesting that builders are contributing to the downward pressure on rents, and likely to adjust course. Additionally, 10 of the top 50 metros saw rent growth when multifamily permitting was lower than recent history in 2024, exacerbating upward pressure on rent and raising the likelihood that builders will increase permits in the near-future.

Source: Realtor.com rental data and calculations of Census Bureau BPS data

To identify multifamily permitting trends, we compared the 2024 annual figures for units permitted for construction in projects of 5 or more units to the average of the same metric for 2019-2023. Metros building more multifamily units than the previous five years are further to the right, and metros where builders are pulling back are further to the left. Higher on the graph are metros where rent is rising faster, and lower on the graph are metros where rent is falling faster. The upper right and lower left quadrants contain markets that we expect to see little change in: either rents are growing and supply is working to keep up or rent is falling and builders are reducing permit activity, likely as a result. The unstable quadrants are the top left and bottom right, and one notable member of these groups is the New York City metro, which had the highest year-over-year rent growth of any metro in February and a slight retreat in multifamily permitting. We expect rent to continue to rise in the Big Apple for this reason. On the opposite side of the equation, the scatter plot, and the country, San Diego is seeing a significant retreat in rent year over year at the same time that multifamily permitting picked up in 2024 from its previous baseline. Boosting supply at the same time that demand appears to be waning will lead to even further rent declines in San Diego. 

Appendix: Rental Data–50 Largest Metropolitan Areas–February 2025

Methodology

Rental data as of January 2025 for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on Realtor.com. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the 50 largest metropolitan areas. Realtor.com began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019. Construction permitting data comes from the Census Bureau Building Permits Survey.