Rent Growth Projections

My 3-Year Outlook on US Rent Growth: First, some background: I'd ground any forecast by stating I expect national rents to rise on a pace more or less in line with inflation over any long time period. 2-3% per year. This will happen in a market with balanced supply and demand, in a monetary system like the US, with fiat currency targeting 2% inflation. In some markets, that are growing quickly, with great jobs and lots of inbound migration, this could be a little higher - like 4-5% per year over long time periods as demand outpaces supply. I'd expect for example, all else equal, for more rent growth in Denver, CO, than Memphis, TN, over the next 20 years, compounding from current rates. Some will disagree. If interest rates remain high, this is further upward pressure on rents in the near-term, as the alternative to renting - buying a home with a mortgage, is expensive - this should increase demand for rentals. Rents are also a function of supply - 2024 saw the most new construction of multifamily units in American history (nearly 575,000 estimated 2024 deliveries of new multifamily inventory), and 2025, while not a record setting year, will see deliveries top 500,000 again - a huge supply increase. Ok - Here's the forecast: 1) 2025 will not see much national rent growth as we continue to deliver so much supply that prices remain largely flat - pacing behind overall inflation (1-2% rent growth). Markets with disproportionately high new construction, like Austin, TX, will see rent growth pace behind inflation or even (again) fall slightly on average. In markets like Chicago or Baltimore, where there is not much new construction, we will see rents rise faster than inflation. 2) 2026 will see new multifamily deliveries slow to closer to historical lows, though not quite as low as what we saw in the great recession. We know this because starts are in the 240,000 unit range, and construction is a pipeline that takes time. Thus, I think that we could see national rents rising in the high single digits, or possibly surging as much as 10% in 2026 vs 2025, with some markets seeing rents rise even faster than that - Austin, TX regaining much of the lost growth in 2024 and 2025, for example. This could be a huge problem, as the "the rent is too damn high" people will be extremely upset with huge surges in the cost of living, felt acutely in some major metros. 3) 2027-2029 should see a return to a more normal inflation adjusted rent growth curve, with the caveat that if supply continues to remain relatively low, we could see national rent growth outpace inflation in these years as well, so long as interest rates remain high. If interest rates come down in out years, then we should see more demand for homes, which will increase prices, and have a modest dampening effect on rent. This will make buying rentals in 2025 challenging, as the market expects high rent growth in out years, and will bake in those projections to current pricing.

Apartment operators are nervous. You can see it in the latest rent data. After six straight months of increased rent momentum nationally, year-over-year rent growth has backtracked a bit in each of the past two months -- coinciding with prime leasing season. Nationally, YoY effective rent growth eased from 1.05% in March to 0.74% in May. The modest backtracking comes DESPITE strong absorption, steady occupancy rates, and improved affordability (declining rent-to-income ratios). We talk a lot about weak consumer sentiment. But it's not just consumers. Sentiment is a powerful variable -- even if one hard to measure -- among operators setting rents. When operators are nervous, they'll likely sacrifice on rents (or ramp up concessions) to protect occupancy. It's happening most clearly in the high-supplied markets across the Sun Belt and Mountain regions, BUT we're also seeing stalled momentum in the lower-supplied Midwest and Coastal markets. So while it was the 40+ year high in supply that pushed rents down in the last two years (even amidst strong demand), it's not just about supply anymore. Washington, D.C., is a prime example of this trend. There's been a lot of nervousness about the D.C. market due to DOGE cuts and federal layoffs. And yet apartment occupancy rates have held strong, improving 50 bps since January and now topping 96%. Rent-to-income ratios among new lease signers (in professionally managed, market-rate apartments) have fallen to 23.1%, according to RealPage data. The REITs with D.C. exposure have all reported solid demand and healthy collections there, too. And yet: Rent growth in D.C. is backtracking more than most of the country. Year-over-year effective rent growth eased from 3.45% in March to 2.35% in May. In most lower-supplied Coastal and Midwest markets, we're seeing operators just hold steady on rents rather than continue the steady upward push we saw previously. And remember: This is the time of year we typically see rents accelerate. In the higher-supplied Mountain and Sun Belt markets, reduced effective rent momentum is primarily driven by increased concessions. Among stabilized apartments (non lease-ups) here utilizing concessions, the average discount increased from 8.9% of asking rent in March to 10.1% in May. That's more than one month "free" on a 12-month lease. Markets with the most deceleration in effective rent change over the past two months include a mix of lower-supply and higher-supply markets: Las Vegas, Riverside, Baltimore, Austin, Memphis, Milwaukee, Kansas City, Washington DC, Denver and Orlando. Markets immune to the trend (with continued momentum) include San Francisco, where sentiment was previously so low it could only go up. There's no other reasonable explanation for slowing rent momentum than nervous operators worried about weak consumer confidence and the parade of headlines warning of a potential recession. Where do rents go from here? Thoughts? #apartments #rents

The Multifamily Market Just Handed Us an Opportunity. Here's Why. 📊 Let me hit you with some numbers that should make every developer/investor stop and think: Multifamily starts? Down 74% from 2021. (CBRE, Q3 2024) Construction pipeline? Collapsing faster than anyone predicted. Everyone's panicking about oversupply. But the data tells a different story. Here's what actually happened: 2022-2023: Rates exploded. Projects stopped penciling. Starts fell off a cliff: down 70% from peak. (CBRE Research) 2024: That pipeline from the cheap money era kept delivering. 440,000 units hit the market. Vacancy climbed to 5.2%. (Fannie Mae, Freddie Mac) Rents? Negative growth in many markets for the first time in years. But here's what nobody's talking about (exception my friend Brad Hunter): Right now, for every 1.8 apartments finishing construction, only ONE is starting. (NAHB, Feb 2025) Read that again 👀: By 2026, deliveries will be cut in HALF. (CBRE) Ten of the sixteen largest markets already passed peak supply. The rest peak in 2025. The opportunity? It's staring us in the face. 🎯 → Cap rates jumped 155 bps from early 2022 to late 2023 (CBRE) → Cap rates now exceed pre-pandemic levels by 70 bps (CBRE) → Replacement costs? Through the roof from inflation → We can buy assets at pricing not seen in years While many are waiting for "the bottom," the opportunity is here now. Why this matters: The buy-vs-rent premium is still 32%. (CBRE) People literally cannot afford to buy homes, so they're staying renters longer. Job growth remains solid. Household formation continues. Supply is about to get TIGHT. Rent growth projected to accelerate to 4%+ by 2026. (CBRE, Freddie Mac) The timing for strategic acquisitions is becoming increasingly compelling. By late 2026, those sitting on the sidelines may find themselves competing for fewer opportunities at higher prices. This window won't stay open forever. ⏰ The best opportunities in multifamily happen when sentiment is worst but fundamentals are turning. We're in that moment right now. What are you seeing in your markets? Sources: CBRE US Real Estate Market Outlook 2025, Freddie Mac Multifamily Outlook, NAHB Market Research, Fannie Mae Multifamily Commentary #MultifamilyDevelopment #RealEstateInvesting #CommercialRealEstate #Apartments #CRE #MarketTiming #RealEstateDevelopment Southern Waters Capital

Are renters “trading up” in 2026… or staying put because buying is still materially more expensive than renting? Affordability—not amenities—is what supports sticky occupancy going into 2026. What the CBRE data shows: → Average monthly mortgage payments for new homes are ~35% higher than apartment rents (CBRE research cited in their release/outlook). → CBRE expects the premium to buy vs. rent to ease to ~32% from ~35% by the end of 2025 (narrowing, but still meaningful). → CBRE forecasts ~3.1% average annual multifamily rent growth over the next five years, above the ~2.7% pre-pandemic average. Why that matters for occupancy + rent behavior → When the “cost-to-buy” premium stays wide, more households remain renters longer. → With tighter household budgets, demand tends to concentrate around payment stability (vs. paying extra for upgrades). How this can show up operationally (NOI levers) → Renewals: modest increases can be more achievable when comparable options (including homeownership) remain meaningfully higher-cost. → Turnover: when buying remains expensive, renter “stickiness” can increase. → Lease-up: units priced closer to the renter budget band can see faster absorption than units that require a “trade-up” decision. Investor takeaway: If you’re underwriting 2026 performance, the key supporting factor to track is the cost-to-buy vs. cost-to-rent premium in your market—because it directly influences how long households stay renters and how price-sensitive renewals/lease-ups may be. Which market are you watching where the rent-vs-buy gap is most clearly supporting demand right now? #Multifamily2026 #RentalMarket #RealEstateInsights #RentVsBuy #HousingAffordability #CRE #NOI #CBRE #RealEstateInvesting #MultifamilyStrategy #OccupancyTrends #RentGrowth #UnderwritingInsights

Multifamily rent growth is entering 2026 with real momentum. Across the major cities in this chart, average annualized effective rent growth in Q4 2025 was just over 3%. Two takeaways: 1️⃣ Big dispersion across markets. The red dots show current annualized growth rates—San Francisco was +16% in Q4 2025, while Austin was −2%. 2️⃣ Broad acceleration vs. Q3 2025. Most cities saw annualized rent growth pick up in Q4 (the colored arrows). In places like Jacksonville and Orlando, Q4 annualized rent growth was more than 10 percentage points higher than Q3. 💡: starting points differ wildly, but momentum is improving across most markets.