Constricted Pipeline for New Deliveries Means No New Wave to Maintain Equilibrium
CHICAGO, Nov. 21, 2024 /PRNewswire/ — A widening supply and demand imbalance for apartments across the U.S. will drive national annual year-over-year (YOY) Class A multifamily rent growth up 2.4% by January 2026, with rates in markets such as Colorado Springs, Dallas, Jacksonville, Las Vegas, Orlando, Raleigh and Tampa increasing between 4.0% and 5.7%.
In its 2025 Rent Growth Forecast, Origin Investments’ proprietary suite of machine learning models, Multilytics® is also forecasting YOY Class A rent growth gains in the West, Northeast and Southeast regions of the country at or above the 3% historical national average. The Southwest region is an outlier where YOY rent growth is predicted to be only 0.2%.
“We’re seeing record delivery of new product, the result of unprecedented new development that broke ground three plus years ago, when interest rates were at their lowest,” said David Scherer, co-CEO, Origin Investments. “But that tremendous wave of deliveries isn’t being replaced. In the absence of the next wave, I see a world where rents continue escalating in the next one, two, three and maybe even four years.”
In the Multilytics report, Origin’s five-year compounded annual growth rate (CAGR) for rents in the 15 cities where it invests and/or owns and manages multifamily assets all are greater than 4.0%, and ranges from 4.2% in Austin to 5.7% in Tampa.
Newmark projects the number of expected deliveries in 2024 to be approximately 600,000. However, the pipeline of deliveries is expected to fall precipitously, by 15.2% in 2025 and 53.8% in 2026. Demand for units, especially in growth markets around the country, isn’t expected to change, with absorption keeping pace with mew deliveries.
At the market level, Origin is predicting rent growth in 15 targeted markets where the firm continues to evaluate future potential developments or acquisitions. According to Multilytics, by June 2025 all but three of Origin’s target markets will return to positive growth, with Austin, San Antonio and Denver lingering in the negative. However, by January 2026, all markets will return to positive territory, with seven markets topping 4% and six increasing by at least 3%. Two markets will have rent growth from 1.5% to 2.0%.
The Origin markets experiencing the greatest YOY annual rent growth for Class A apartments are Orlando, 5.6%; Jacksonville, 5.6%; Las Vegas, 4.6%; Tampa, 4.4%; and Raleigh, 4.4%. The two markets with rent growth lower than 2% are Denver, 1.7% and Austin, 1.6%.
In other significant national and regional markets across the country, Origin projects that YOY Class A apartment growth will exceed 4.0% in Miami (4.3%) and Seattle (4.4%); meet or exceed 3.0% in New York (3.0%), Los Angeles (3.0%) and San Francisco (3.1%), and exceed 2.5% in Chicago (2.6%) and San Diego (2.8%).
Multifamily market dynamics will produce a sharp contrast in YOY rent growth among some markets between June 2025 and January 2026. In Austin, for example, YOY rent growth in June 2025 is projected at -2.6%, but in January 2026 it is projected to increase to 1.6%. Other markets with significant discrepancies include Denver, at -2.1% rent growth in mid-2025 but projected at 1.7% by January 2026. San Antonio, too, will have a nice turnaround, from -0.4% at mid-year to 3.1% by January 2026.
According to the Origin report, three of the top five market reporting the most dramatic contrasts are in Texas: Austin, 4.2%; San Antonio, 3.4%; and Dallas, 3.3%. In Houston, the contrast from mid-year 2025 to the beginning of 2026 was only 1.0%.
“From an investment perspective, I believe we are at the beginning of a pretty significant bull cycle for rents,” Scherer said. “At this point, it will take an exogenous shock to bring it back on the supply side.”
Ryan Brown, Data Scientist, Origin Investments, identified a deep recession and meaningful decline in homeownership costs as two exogenous shocks that could significantly alter the record pace of absorption. In a recession, household formation would fall because instead of renting an apartment, individuals tend to move back home or take on one or more roommates who otherwise would be renting apartments themselves. He also noted markets where it could be as much as 40% to 50% more expensive to buy than rent.
“The combination of a pricing reset and a significant reduction in mortgage rates isn’t likely to occur quickly enough to make a meaningful difference in the cost of renting versus buying,” he said. “As a result, we are increasingly becoming a nation of renters.”
Last year, Origin’s prediction for a return to normalized rent growth was tempered by looming unquantifiable market risks. Despite a changed landscape, and in the presence of a transitioning political picture, unquantifiable risks remain a concern.
The Origin report says it’s too early to predict what a new administration will do in 2025 and beyond. President-elect Donald Trump’s proposals to increase tariffs are likely to lead to higher interest rates and rising inflation. Other proposals could spur job creation. His goal to keep interest rates low to may be hampered by higher material costs, which could make new construction deals more difficult.
About Origin Investments
Founded in 2007, Origin Investments is a private real estate manager that helps high-net-worth investors, family offices and registered investment advisors grow and preserve wealth by providing tax-efficient real estate solutions through private funds. We build, buy and finance multifamily real estate projects in fast-growing markets throughout the U.S. In 2023, we founded affiliate firm Origin Credit Advisers, an SEC-registered investment adviser that provides yield-focused multifamily debt investments for qualified purchasers. SEC registration does not constitute an endorsement by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Through our Origin Exchange platform, introduced in 2024, investors can complete a 1031 exchange of their properties for professionally managed, institutional-quality assets. To learn more, visit www.origininvestments.com.
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