Apartment rents across the United States are expected to accelerate at a quicker clip in the second quarter as demand remains solid and the number of units completed continues to slow.
Nationally, year-over-year multifamily asking rents grew 1.1% this year through March, according to a report from Apartments.com, owned by CoStar Group. That is the same rate as the fourth quarter of 2024. Actual rents rose about 1% from the first quarter of 2024, according to the report.
The national average on a rent-per-unit basis ended the first quarter at $1,754 monthly compared to $1,735 monthly at the end of the first quarter of last year, Apartments.com found. Since mid-2023, year-over-year rent growth has hovered just above 1% after its rapid deceleration in 2021 and 2022.
"A moderation in deliveries and solid demand should lead to accelerated rent growth by the second quarter of 2025 and year-end gain in the high 2% range," according to CoStar's national multifamily report. "Projections suggest that all major markets will achieve positive rent growth by the end of 2025."
However, half of those markets are expected to fall short of their five-year pre-pandemic average multifamily rental rate growth. "This suggests that significant variations in rent performance across different markets will persist throughout the year," CoStar said.
Landlords in Midwest cities saw the best overall asking rent acceleration and outperformed their Sun Belt counterparts during the first quarter, Apartments.com said. Midwest markets avoided large run-ups of construction over the past three years, keeping supply more in line with demand.
Six of the top 10 markets for annual asking rent growth are in the Midwest, while nine of the 10 weakest-performing markets are in the Sun Belt, where oversupply conditions remain challenging. Kansas City, Missouri, saw the strongest year-over-year asking rent growth at 3.5% in the first quarter, followed by Chicago and Pittsburgh at 3.3% each.
“Relatively modest apartment construction following the pandemic is a key factor in the Midwest's steady rent growth,” said Veronica Miniello, an associate director of market analytics with CoStar. “Many markets in the country, particularly in the Sun Belt region, are dealing with record-level completions, which weigh on rent growth. Landlords in Midwestern markets are still able to push rents higher, given the relatively even balance between supply and demand."
Population growth also is fueling demand for apartments in the Midwest, according to CoStar.
In the Sun Belt, asking rents dropped 4.5% from the previous year in Austin, Texas, followed by Denver, where rents fell by 3.6% over the year, per the report. In Arizona, rents fell by 3.5% in Phoenix and by 2% in Tucson.