Our 2025 Prediction For The Apartment Rental Market

With a reduction of new developments in the US and more rental demand, what can we expect to see in 2025 regarding the rental market?

Are Rents Increasing?

There’s no hiding that the rental market is looking great for 2024 and 2025 for landlords, with higher interest rates causing people to rent rather than buy till conditions get better, the increase for rental properties is higher than ever.

Reduced housing development is also causing a lack of supply and heightened demand, meaning higher rental prices for landlords.

Let’s see what 2024 has brought us so far and what we can expect for the 2025 rental market looking ahead.

Notable Rental Market Trends For 2024

The rental market for 2024 has been a mixed bag; rental prices are higher than in 2023, with some large U.S. cities asking rents for 1-2 bedroom apartments up more than 10% since June 2023 according to Zumper.

Some cities in the US have declined in rental asking prices, with a 5% drop in areas such as California and Florida due to a shift of supply and demand with more developments being built in these areas.

So far, these are the stand-out rental trends for 2024.

• 34% of 2000 renters say they don't plan to buy a home, and 49% say it’s because they can’t afford one.

• Rental prices are now 32.1% higher than they were before the pandemic, but rental growth spikes have slowed down since 2022.

• The co-living market in the US is estimated to reach a $100 billion valuation by 2025.

• Asking rents increased 3.4% in May 2024 compared to last year, according to Zillow’s rental report for May.

• Rents average $2,036 across the U.S., a 0.6% increase from the previous month.

• Wages are rising slower than rents, with rent prices rising at a rate 1.5 times that of wages, as shown by Zillow.

Why Is Rent So Expensive?

Despite rental prices slowing down, they are still more expensive than ever. This is down to a shifting workforce, inflation, and supply and demand imbalance.

• Shift of work - After the pandemic and the rise of remote working, rent in suburban areas shot up after being previously lower which has caused a lack of supply and higher demand in once less sought after areas.

• Inflation - Higher costs mean landlords will push up rents to compensate and get profit. This then contributes to inflation.

• More demand to live alone - There is more demand to rent alone, with people looking for single rooms in apartments or 1-bedroom studios.

• Lack of supply and demand - There is a shortage of rental homes available, especially affordable ones.

• Homeownership barriers - Supply chain disruption, rising mortgage interest rates, and high demands are putting people off buying homes vs renting.

Will Rent Increase In 2025?

The CoStar group predicts that in 2025 and 2026, the rental market will increase after lower rental rates post-pandemic. If rental demand continues to increase, then we will see more undersupply, resulting in higher rental prices.

With the high demand apartment rent trends, being a landlord in the US is still feasible for the foreseeable in 2025 or investing in property is a good choice too. It’s no secret that the housing market in America at the moment is pretty terrible and house prices don’t look like they are going down anytime soon.

Rent Out Your Property With Confidence - Alcove Rooms

For both landlords and renters, we have a solution, Alcove Rooms. Alcove is a leasing platform that helps renters find rooms to rent in beautiful homes with roommates they are comfortable with.

We streamline the renting process, taking care of all monthly rent payments with no hidden fees, all utilities are included in the bill and are 50% cheaper than the average one-bedroom studio apartment.

For landlords, there is a much larger rental market for rooms rather than entire homes, which keeps your property fully occupied throughout the year and generates more rental income for you.

With rent in demand and people having less disposable income to spend on rent, co-living is going to get more popular in 2025 and beyond, especially with the flexibility it gives tenants and remote workers.

We provide both tenant and landlord support throughout the process.

Get more information about Alcove here.