After almost two years of steady or rising momentum, the national average rent growth rate moderated in early June 2025, easing by 40 basis points from the previous quarter to 0.9% year-over-year. This slowdown comes despite stable national occupancy and absorption levels over the trailing four quarters, alongside a notable decline in both new completions and the construction pipeline. The deceleration is particularly noteworthy given the favorable market conditions and because it is occurring at the peak of the spring leasing season, even in some traditionally low-supply markets. In this blog, we explore the key drivers behind the recent moderation in rent growth and offer insights into where rental trends may be headed next.
Although new completions have declined sharply both nationwide and across most major metro areas, the volume of recently delivered units still in lease-up remains elevated. Across the U.S., annual deliveries peaked at approximately 695,500 units just two quarters ago. Given the current monthly absorption rate of about 46,000 units, it would take roughly 15 months to fully absorb this supply—and an additional 250,000 units have been delivered since that peak. As a result, while construction activity may have peaked in 2024, a significant portion of the new supply is still working through lease-up.
This trend is evident across most of the 50 largest metropolitan areas in the country, where nearly half have more or a similar number of units in lease-up as under construction, which is an atypical dynamic that reflects limited pent-up demand. This imbalance, along with the declining number of construction starts in several areas, indicates that most markets are at the back end of the post-pandemic new supply wave, but many still face a glut of unleased new apartments. The resulting abundance of new rental options available to tenants is dampening the pricing power of operators in those areas. In short, supply may have “peaked,” but it hasn’t yet been absorbed, which is keeping rent growth in check.
The national average occupancy rate has remained relatively stable over the past two years, hovering at or just below 94% (excluding units in lease-up). While this stability suggests that the impact of the recent supply surge is subsiding, the current stabilized occupancy rate remains approximately 50 basis points below the 10-year average and 200 basis points below the recent cycle peak in mid-2021. These gaps are notably larger in over-supplied markets such as Austin and Denver.
Additionally, the “year two hangover” is affecting properties delivered in early 2024. Many of these buildings initially attracted renters with one-time concessions, but as those leases expire, landlords face two challenges: retaining renters now facing steep effective rent increases and backfilling remaining vacancies. As a result, new apartments are taking longer to absorb, prolonging the market’s adjustment to the heavy 2022–2024 delivery wave and sustaining concession usage. According to Redfin, fewer than half of apartments completed in Q4 2024 were leased within three months. Consequently, the national concession rate has held near 1.0% since late 2023, continuing to pressure effective rents.
Another important factor tempering rent growth is the backdrop of economic uncertainty in 2025, which has made many property owners and managers unusually cautious in their pricing strategies. Even in markets with relatively low new supply, rents haven’t been rising as fast as expected, partly because landlords are prioritizing occupancy amid worries about the macroeconomy. The consistent and above average concession usage paired with a stable overall occupancy rate in the U.S. suggests that operators are willing to sacrifice some effective rent growth in order to maintain sustainable occupancy levels. This can at least partially be attributed to uncertainty surrounding the current inflation, tariff and geopolitical situation.
Consumer sentiment data support this. Apartment List observes that demand may be softening slightly due to waning renter confidence amid an uncertain outlook. Households are seeing high interest rates, volatile financial markets, and talk of a slowdown, which can make them hesitant to form new households or stretch for higher rents. The rental market is not immune to these psychological factors. For instance, some young adults might choose to stay with roommates or parents a bit longer if they feel nervous about the economy, which dampens rental demand at the margins. Overall, economic uncertainty at the renter and operator level has resulted in increased cautiousness, further placing downward pressure on demand and rent growth.
Renter demand has been surging in most major markets, especially in the Midwest and Northeast, and the national annual absorption rate in the most recent quarter was over 40% above the historical norm. However, the above average renter demand levels may not be directly observed at individual properties or portfolios given that absorptions are now spread across a far greater number of properties than before. These factors appear to have contributed to lower leasing activity.
According to a report from Radix, in June 2025, the national average for property tours per week declined 45% year-over-year to 4.7, but the number of leases signed per week at an individual property only fell around 10% over the last year. Given that the number of units in lease-up is similar or exceeds the under construction inventory and is well above average in most major markets, leasing activity will need to increase to support more substantial rent growth.
Behind the national averages, rent growth varies widely across regions and metro markets in Q2 2025, largely correlating with how much new supply each market has had to absorb. High-supply Sun Belt markets are experiencing the weakest rent performance, while many Midwest and Northeast markets with limited new construction are faring better.
Overall, the recent rent slowdown is not uniform. Rent growth remains weakest in the Mountain West, Southwest and Southeast regions, which generally saw some of the highest concentrations of new development, and strongest in the Midwest, Northeast and select West Coast hubs. For investors and operators, this means the outlook and strategy can differ greatly by market. Those in high-supply cities are using concessions and fighting for occupancy, whereas those in undersupplied markets have more pricing power. This divergence could persist until the national pipeline clears and laggard markets work through their surplus of units, which might take another few quarters in the hardest-hit locales.
Looking ahead, signs point to a stabilizing rental market, though the recovery in rent growth will likely be gradual and uneven across markets. The most recent quarter may mark an inflection point: while supply pressures remain elevated and economic uncertainty lingers, demand has exceeded expectations, and the construction pipeline is thinning, setting the stage for improvement by late 2025.
Q2 2025’s slowing rent growth reflects a convergence of supply and sentiment challenges. The post-pandemic construction boom delivered more units than the market could quickly absorb, leading to lower occupancy, increased concessions, and a more cautious stance from operators. As a result, year-over-year rent growth has flattened, with performance varying by local supply conditions. Yet underlying demand remains strong, and regional oversupply is expected to ease as lease-ups progress. As the pipeline contracts and confidence improves, rent growth should rebound gradually. By late 2025, the market is poised to regain balance, with declining concessions, rising occupancy, and more normalized rent increases. CoStar’s base case projects 2.0% national annual rent growth by year-end, driven by these improving fundamentals.
Overall, the slowdown appears to be a temporary disruption in an otherwise resilient sector, with stabilizing supply-demand dynamics laying the groundwork for healthier growth ahead.
