Pace of New Apartment Rentals Improves Amid Rising Rent Prices

The rental market for new apartments in the U.S. is showing signs of life, as recent data from Redfin indicates an uptick in the absorption rate for newly completed apartments. In the first quarter of 2025, 48% of newly built apartments were rented within three months of completion—an increase from 47% in Q4 of 2024 and 46% in Q3 of 2024. While this increase is modest, it marks a significant shift after a period of decline in the rental absorption rate from 2021 to 2023.

The improved rental rate is partly due to a slowdown in new apartment construction, resulting in fewer available units for prospective renters. The number of new apartments completed in Q1 2025 dropped to 97,000, the lowest since Q4 2023. With fewer options available in the market, landlords are finding it easier to fill units, leading to rising rent prices across many areas.

Rising Rents Reflect Market Shifts

According to Redfin, rents have started to increase again, driven by the cooling supply and strong demand for rental properties. In August 2025, the median asking rent for apartments across the U.S. rose by 2.6% year-over-year, reaching $1,790, just shy of the record high set in the summer of 2022. This is the largest increase since December 2022, following nearly two years of stagnation or declining rents. Additionally, rents saw a 0.3% month-over-month increase, further underscoring the trend of rising prices.

“The apartment construction boom during the pandemic has tapered off, and now fewer new units are entering the market,” said Sheharyar Bokhari, Senior Economist at Redfin. “With high financing costs and increased construction expenses, builders are scaling back, and as fewer apartments are available, landlords are regaining the upper hand, enabling them to raise rents again.”

Challenges for Younger Renters

Redfin’s report also highlights the growing financial strain on younger renters, particularly those in Generation Z and Millennials. According to a recent survey conducted by Ipsos in May 2025, 70% of Gen Z and Millennial renters reported struggling to afford their housing payments, with 41% of homeowners in the same age groups also facing affordability challenges. The survey found that these younger renters are making sacrifices to meet their housing costs, such as cutting back on dining out and vacations.

In fact, 40% of Gen Z and Millennial renters said they were eating out less often to afford rent, and about one-third had reduced or eliminated their vacation plans. This generation’s financial concerns are driving shifts in housing preferences, with many turning to rental markets as homeownership becomes increasingly out of reach due to rising home prices and interest rates.

Declining Multifamily Permits and the End of Rent Concessions

Despite the increased demand for rental properties, the construction of new multifamily units is slowing. Permits to build multifamily housing have fallen 23.1% since the pandemic-driven construction boom, as high borrowing costs and sluggish rent growth discourage developers. This slowdown in new construction is expected to continue, further tightening the supply of available rental units.

Additionally, the days of rent concessions and incentives, like offering a free first month of rent, may be coming to an end. According to a study by Apartments.com, 36% of renters said they would be most likely to sign a lease if they received a free month of rent as a concession. However, as rents rise and demand strengthens, landlords are expected to reduce these incentives, which were previously used to attract tenants in a more competitive market.

A Shift in Rental Market Dynamics

The rental market’s dynamics are shifting. With the number of new apartments entering the market slowing down, more renters are competing for fewer units, leading to higher rent prices and fewer concessions. Young renters, in particular, are feeling the strain as homeownership remains out of reach for many, and rental affordability becomes an increasingly pressing issue.

As the cost of renting continues to climb, prospective renters may need to adjust their expectations and make sacrifices to secure housing, whether that means moving to a more affordable area or compromising on desired apartment features. For landlords, this could be an opportunity to capitalize on rising demand, but the future of the rental market will depend on how these trends continue to play out in the coming months. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.