Apartment Construction Surges Ahead of Demand, Pushing Rents Down in Key U.S. Markets
In May 2025, the U.S. rental market saw a continued shift in favor of tenants, as rental prices edged lower year-over-year, largely due to a surplus in apartment construction. According to Redfin’s latest analysis, the national median asking rent dipped 1% from a year earlier, settling at $1,633 about $72 below the peak recorded in August 2022.
While rents rose modestly by 0.5% month-over-month, the annual decline is a reflection of supply outpacing demand. Redfin reported that in 28 of the 44 largest metro areas it tracks, asking rents dropped—the most widespread decrease seen since September 2023.
“Apartment construction remains near a 50-year high, and even with healthy rental demand, it’s not enough to absorb all the new units,” said Sheharyar Bokhari, Senior Economist at Redfin. “This puts renters in a stronger negotiating position while forcing landlords to compete by offering incentives or lowering prices.”
Vacancy Rates Hold Steady at Multi-Year Highs
Vacancy data from Q1 2025 shows that rental units in buildings with five or more apartments had a vacancy rate of 8.2%, matching the previous quarter and reaching the highest level since early 2021. Adding to the concern: fewer than half of newly built apartments are leased within three months, a historically low figure.
Monthly Rent Growth Stabilizing, But Pandemic Volatility Is Gone
Though prices are slipping, rent fluctuations have cooled dramatically compared to the erratic swings seen during the height of the pandemic. May marked the 15th straight month in which rents either declined slightly or increased by less than 1% year-over-year. That’s a stark contrast to the pandemic period, when rents surged as high as 17.7% YoY and fell as much as 4.1% in other periods.
Top 10 U.S. Metros with the Biggest Annual Rent Drops
| Metro Area | Median Rent | Monthly Change | Yearly Change |
|---|---|---|---|
| Austin-Round Rock, TX | $1,385 | -1.0% | -8.8% |
| Minneapolis-St. Paul, MN-WI | $1,551 | +0.7% | -6.3% |
| Columbus, OH | $1,427 | +0.5% | -3.5% |
| Nashville-Davidson, TN | $1,540 | -0.4% | -3.4% |
| Portland-Vancouver, OR-WA | $1,799 | +0.2% | -3.4% |
| Raleigh-Cary, NC | $1,474 | +1.7% | -3.4% |
| Las Vegas-Henderson, NV | $1,499 | -0.1% | -3.1% |
| New York-Newark-Jersey City, NY-NJ-PA | $2,887 | +1.5% | -3.1% |
| Phoenix-Mesa, AZ | $1,493 | +0.5% | -3.0% |
| Denver-Aurora, CO | $1,780 | +1.8% | -2.9% |
Austin Leads in Construction and Rent Declines
Austin, Texas, had the sharpest rent drop among the metros tracked down 8.8% YoY, with a median rent of $1,385, the lowest since February 2021. The decline correlates with a surge in multifamily building, as the city issued permits for 64.5 units per 10,000 residents between April 2024 and March 2025 the highest permit rate in the nation.
Other metros such as Columbus, OH, and Nashville, TN, also ranked high in new permits issued and made the top 10 for YoY rent drops.
Renters Stick Around as Homeownership Gets Pricier
With rents softening and home prices continuing to rise, many Americans are choosing to rent longer. In cities like Boise, ID, even well-qualified renters are finding it more affordable to lease higher-end apartments than to purchase modest homes.
“People are staying in rentals because they’re getting better value than they would buying,” said Nicole Stewart, a Redfin agent in Boise. “Plus, sellers still think they can get top dollar, and many homes are overpriced for today’s buyers.”
The growing cost gap between renting and buying has become more pronounced. On average, homeowners now need to earn over $50,000 more annually than renters to comfortably afford a mortgage, according to Redfin.
Where Rents Are Rising Instead
Despite declines in most metros, rents reached all-time highs in four U.S. cities last month. Cincinnati saw the largest year-over-year increase at 7.4%, followed by:
- Tampa, FL – up 4.2%
- St. Louis, MO – up 4.0%
- Pittsburgh, PA – up 3.5%
- Birmingham, AL – up 2.4%
Meanwhile, median rents also hit new highs in:
- Chicago – $1,781 (+1.9%)
- Memphis – $1,274 (+1.9%)
- Washington, D.C. – $2,104 (+2.4%)
Smaller Apartments See Steeper Price Cuts
Studio and one-bedroom units saw a 0.7% annual drop, with rents averaging $1,492. Two-bedroom apartments saw the steepest decline down 1.8% to $1,704, the largest drop since early 2024. Three-bedroom units dropped slightly by 0.2% to $2,009, the smallest movement in over a year.
Bottom Line:
The rental market is cooling off in many areas, especially those with aggressive multifamily development, like Austin and Minneapolis. While affordability remains a challenge for would-be buyers, renters are enjoying more flexibility and leverage at least for now. For more information about finance visit Nadlan Capital Group.
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