2025 marked a year of moderation across the US multifamily sector

Article originally posted on CoStar on January 22, 2026

The U.S. multifamily sector closed 2025 with easing demand, elevated supply, and rent growth that flattened after nearly two years of modest gains. The past year was marked by deceleration across several indicators as the market continued to adjust to three consecutive years of substantial new completions.

Demand remained healthy but stepped down from the previous year. Full-year absorption, or the net change in occupancy, reached 438,000 units, nearly 20% below 2024 levels, as slower population and job growth reduced renter household formation. New completions again exceeded demand, adding more than 500,000 units and pushing the national vacancy rate to 8.5% in December.

High vacancy led to widespread use of concessions, with nearly half of all advertised units including some form of incentive at the start of this year. This level stands far above pre-pandemic norms and reflects the lingering impact of elevated construction activity throughout the past several years.

Rent growth softened over the course of 2025 and finished the year essentially flat. For much of the prior two years, annual gains hovered around 1% before weakening late in the year as supply continued to outpace demand.

Conditions varied significantly by property type and region. Luxury properties were the most affected by oversupply, accounting for the majority of units under construction. Mid-priced properties recorded modest positive yearly rent gains, driven by a more limited supply increase.

Regionally, the Northeast, Midwest, and major California metropolitan areas outperformed in 2025, supported by more balanced supply conditions. Many Sun Belt markets, still absorbing several years of heavy construction, posted negative rent growth for the year.

Following three years of historically high completions, new apartment deliveries are expected to decline in 2026, giving the most oversupplied markets an opportunity to absorb existing units. With 2025 now closed, the sector enters the new year at an important juncture, shaped by the cumulative effects of elevated supply and moderating demand.