National rent growth has stalled, vacancies are climbing in oversupplied markets, and a wave of new units is still arriving. Here is what the data says about the second half of 2025.
National rent growth has essentially flatlined. Vacancy rates are rising in markets that absorbed record deliveries over the past two years. And the new supply pipeline — while thinning — has not yet cleared. For multifamily owners, STR operators, and accredited investors with capital in residential assets, the second half of 2025 requires a clear-eyed read of what the data actually shows.
This post synthesizes current rent trends, regional vacancy data, the remaining supply overhang, and the macro factors that will shape performance through year-end.
Asking rents across the U.S. are effectively flat compared to twelve months ago. CoStar data confirms that apartment rents remain suppressed by elevated new supply, with year-over-year growth hovering near zero in most major metros. This is not a demand collapse — it is a supply correction.
Demand for rental housing remains structurally healthy. Household formation continues, homeownership affordability has not meaningfully recovered, and the renter pool has not shrunk. What has changed is the denominator: there are simply more units available than there were in 2022 or 2023.
The stall traces directly to the 2021–2023 construction boom. Developers who broke ground during the period of peak rent growth and cheap debt delivered those units into a market where mortgage rates had locked would-be buyers into renting — but simultaneously flooded the supply side. The lag between groundbreaking and delivery created a glut that markets are still working through.
In practical terms, operators are competing on concessions rather than rate. One month of free rent, waived application fees, and flexible move-in terms have become standard in oversupplied submarkets. Effective rents — what tenants actually pay after concessions — are materially lower than asking rents in many Sun Belt markets.
Not every market is flat. Markets with constrained supply pipelines — primarily older, denser metros with high barriers to new construction — are still producing modest rent growth. The Midwest and parts of the Northeast are outperforming. Markets like Chicago, Cleveland, and certain New England submarkets show year-over-year gains in the 2–4% range, driven by limited new deliveries and steady in-migration from higher-cost coastal cities.
Vacancy is rising nationally, but the distribution is uneven. Sun Belt markets that absorbed the heaviest new supply are carrying the highest vacancy rates. Markets like Austin, Phoenix, Nashville, and Atlanta are reporting multifamily vacancies in ranges that would have been considered distressed just three years ago.
NAR's commercial real estate market data through mid-2025 reflects this pressure: multifamily vacancy rates have climbed across the South and Southwest, with absorption struggling to keep pace with deliveries in the most active construction corridors.
The Sun Belt correction is real but it is not uniform. Houston, for example, continues to absorb new units at a faster pace than Dallas or Austin — driven by stronger in-migration, a more diversified employment base, and a lower median household income threshold that keeps more of the population in the renter pool.
Markets that over-built luxury units are carrying the heaviest concession burdens. Class A product in oversupplied submarkets is competing aggressively on price, while Class B and Class C assets — especially those in strong school districts or proximate to employment — are holding occupancy more effectively. The flight-to-value dynamic is real and measurable.
Outside the most oversupplied Sun Belt corridors, vacancy trends are more stable. The Midwest continues to outperform on occupancy. Tertiary markets with limited pipeline — secondary Texas cities, smaller Southeast metros — are holding above 92% occupancy in many cases. Operators who built or acquired in these markets are not dealing with the same absorption pressure as their Sun Belt peers.
The pipeline is thinning, but it has not cleared. CBRE's mid-year sector health assessment notes that while multifamily construction starts have declined sharply from peak levels, the units already under construction represent a continued delivery wave through at least mid-2026 in many markets.
The practical implication is that the supply pressure felt today is not resolved by the fact that starts have slowed. Units already in the pipeline will continue to deliver and compete for the same renter pool. Operators who plan for continued concession pressure through the first half of 2026 are underwriting more conservatively — and more accurately — than those who assume a rapid absorption recovery.
The pipeline clearance timeline varies by market. Markets that stopped permitting earlier — Phoenix, some Texas submarkets — are further along in the absorption curve. Markets that permitted aggressively through 2023 are still working through the delivery tail.
NAR's September 2025 commercial real estate data reinforces that national multifamily absorption has improved year-over-year, but remains insufficient to fully offset current vacancy levels in the most active delivery corridors. The math improves in 2026; it does not snap back in Q4 of 2025.
The STR market is navigating a distinct set of dynamics. AirDNA's 2025 mid-year STR outlook identifies slowing demand growth and rising supply as the twin pressures compressing STR margins. Revenue per available night (RevPAN) is declining in markets that saw aggressive host supply growth over the past two years, particularly in leisure-dominated coastal and mountain markets.
The operators performing best in this environment share a common characteristic: institutional discipline applied at the unit level. Dynamic pricing that responds to real-time market signals, multi-platform distribution that does not rely on Airbnb alone, and occupancy management strategies that smooth demand across shoulder seasons. This is exactly the operating model that Selly's Airbnb property management service was built around — and why Selly's managed portfolio is averaging 78.4% occupancy in 2025 against a market where many self-managed operators are watching rates and occupancy compress simultaneously.
Markets with strong demand drivers and limited new host supply are holding better than leisure-only markets. Business-adjacent markets — cities with consistent corporate demand, medical corridors, or event-driven traffic — are absorbing the supply growth more effectively than pure leisure destinations.
Galveston remains a strong performer in the Texas coastal segment, as discussed in Selly's analysis of Galveston coastal STR performance. Markets where STR inventory growth has plateaued due to regulatory pressure — certain California cities, some Florida municipalities — are seeing occupancy recover as the supply ceiling holds.
Four macro forces will determine where rental market performance lands by year-end.
The Fed's rate trajectory remains the central variable for multifamily transaction volume and refinancing pressure. Cap rate compression in Sun Belt markets reversed sharply as rates rose, and while there has been modest rate relief, the bid-ask gap between buyers and sellers has not fully closed. Owners who need to transact are facing pricing realities that the 2021 vintage pro forma did not contemplate. NAR's March 2025 commercial data reflects continued transaction volume weakness in multifamily as this gap persists.
Renter demand is directly tied to employment stability and real wage growth. The labor market has remained more resilient than many forecast, which has kept rental demand from deteriorating even as supply has grown. If employment softens materially in H2 2025, the vacancy pressure in oversupplied markets gets meaningfully worse. If it holds, absorption gradually improves.
Household formation is the structural demand driver that gets overlooked in short-term supply/demand analysis. The U.S. continues to form new households at a pace that supports long-term rental demand — the question is whether those households form in markets with adequate supply or in markets that are already oversupplied. Demographic tailwinds favor rental demand at the national level through at least 2027.
Mortgage rates have kept a significant share of would-be buyers in the rental pool longer than expected. This is a supply-side gift to multifamily operators — a cohort of renters who are creditworthy, stable, and not voluntarily exiting the rental market. The moment mortgage rates decline meaningfully, this cohort will shrink. Operators underwriting today should model for some demand attrition if rates fall 150 basis points or more from current levels.
The operators who will outperform in H2 2025 are not the ones waiting for the market to recover — they are the ones actively managing the gap between their current occupancy and their stabilized target. Passive leasing strategies do not work in a market where the competition is running concessions and the pipeline is still delivering.
For communities sitting below 90% occupancy, the calculus is simple: every unit-month of vacancy at current market rents is real revenue lost that does not come back. The real cost of vacancy in multifamily is almost always larger than operators model when they account for lost revenue, increased turnover costs, and the reputational drag of visible vacancy.
Selly's occupancy stabilization program runs from audit to stabilization — identifying exactly where a property is losing prospects and deploying the paid media, ILS optimization, and leasing velocity programs to close that gap. The target timeline is 4–6 months from campaign launch to 90%+ occupancy.
The rental market in the second half of 2025 rewards discipline — not optimism. Rent growth has not disappeared permanently; the pipeline will thin, absorption will improve, and operators who hold their communities through the supply correction will benefit from tighter market conditions on the other side. But that outcome requires surviving the current environment with occupancy intact.
For multifamily operators who need to close the gap between current and stabilized occupancy, the time to act is before the next leasing cycle — not after it. Request a vacancy audit and get a clear picture of where your property stands and what it takes to stabilize.
