U.S. multifamily vacancy trends are moving in two directions as the market adjusts to shifting supply dynamics and renter preferences. Overall vacancy edged lower for the third consecutive quarter—now at 9.0%—as newly delivered units leased up faster than anticipated. In contrast, stabilized vacancy continued to rise as older properties saw softer occupancy, while renters gravitated toward newer buildings offering concessions and upgraded amenities. The result is a market in transition: strong demand continues to absorb new inventory in high-growth metros, while legacy assets face mounting competition and pricing pressure.
Key Takeaways
Apartment demand remained robust in Q3 2025, with more than 100,000 units absorbed for a third consecutive quarter—among the strongest performances in recent decades.
Vacancy declined for the third straight quarter, as owners prioritized occupancy over rent growth; rents rose just 1.5% year over year, down from 2.2% earlier in 2025.
The multifamily supply cycle has peaked, with Q3 deliveries down 27% year over year and future completions projected to stay below 100,000 units per quarter through 2026.
Vacancy Patterns Reflect a Market in Transition
Vacancy trends are moving in opposite directions as the multifamily market adjusts to shifting supply and renter dynamics. Overall vacancy continued to decline in Q3 2025, supported by strong lease-up of newly delivered properties, while stabilized vacancy rose as older assets lost renters to new developments offering concessions and upgraded amenities. The divergence highlights a market in rebalancing—healthy absorption in high-growth metros contrasts with softer conditions in older, supply-saturated areas as competition intensifies and renters trade up for value and quality.
Rent Growth Cools as Occupancy Takes Priority, but AI Hubs Lead Gains
Rent growth weakened in Q3 2025 as owners prioritized occupancy over pricing amid softer job growth and elevated economic uncertainty. National rents rose just 1.5% year over year, the slowest pace since the pandemic, as most owners adopted defensive leasing strategies to preserve occupancy. Renewal rents held firm at 3%–4%, though new lease rates softened in high-supply southern markets. In contrast, the Bay Area emerged as a national leader, driven by renewed venture capital investment in AI, broader return-to-office mandates, and a notable improvement in crime and livability. San Francisco (7.8%) and San Jose (5.2%) led rent gains, while the Midwest (3.2%) and Northeast (3.4%) also outpaced the national average. Rent growth remained weakest in the South, where elevated new supply continued to outstrip demand.
Multifamily Construction Pipeline Contracts to Decade Low
The multifamily construction pipeline is emptying rapidly after two years of record deliveries. High financing costs, tighter lending conditions, and the ability to acquire existing assets below replacement cost have sharply reduced new project starts. While U.S. Census data suggests a modest uptick, private-sector tracking indicates activity has fallen to its lowest level since 2012, suggesting the rebound is overstated. The active pipeline now stands at roughly 450,000 units—the lowest in a decade, more than 50% below its peak, and 17% under pre-pandemic norms. With few projects breaking ground, further declines are expected in the quarters ahead as the development cycle continues to reset.
Outlook
Recovery momentum is strengthening across the Sunbelt as construction pipelines clear and new deliveries taper. The region’s demand fundamentals are among the strongest in the nation—driven by sustained in-migration, job growth, and relative affordability—but an extended period of elevated supply has tempered rent growth in recent years. With new construction now easing, vacancy rates across major Sunbelt metros are beginning to compress; if demand remains steady, that compression is expected to accelerate through 2026, supporting a renewed phase of rent growth.
Sources:
U.S. Multifamily MarketBeat | US | Cushman & Wakefield
Multifamily in 2025: Demand Will Dominate - Gray Capital
Q3 2025 National Multifamily Market Report: Underlying Demand in the National Market Remains Strong
2025 multifamily market update for real estate investors
2025 U.S. Real Estate Market Outlook Midyear Review | CBRE
United States Economic Forecast Q3 2025
Commercial Snapshot Q3 2025 | Old Republic Title
August 2025 Commercial Real Estate Market Insights
