Renters across the U.S. can breathe a sigh of relief, at least for the time being, as rent prices nationwide have fallen for the 19th straight month—but a looming construction shortage could spell trouble in the near future.
The median asking rent price across the 50 largest metros slid to $1,691 in February, shedding $15 compared with the same time a year ago, writes Realtor.com® senior economist Joel Berner in the February 2025 Rental Report.
Even though the rents have been gradually decreasing over the past year and a half, the bad news is that Americans are still paying much more for housing than they did before the COVID-19 pandemic, when the national rent was over 14% lower.
The declining rental rates have been a double-edged sword because they have made building multifamily housing less appealing to investors over the past few years.
According to Berner, that could result in lower rental unit inventory going forward and, in turn, cause rent prices to go up.
In 2024, fewer than 294,000 units in multifamily rentals were permitted for construction across the 50 largest metros from coast to coast, the lowest number since 2017.
Even at the height of the pandemic in 2020, there were more units permitted, at 318,000.
“This represents a major retreat in multifamily construction permitting, no doubt due to the fact that rents were falling year over year throughout 2024,” says Berner.
According to economists’ projections, if the supply of new rental units continues dwindling, as the latest permitting figures suggest, the downward trajectory of rent prices may not be sustained.
“We expect rents to start to grow again in the coming years as the pace of new units hitting the market slows,” warns Berner.
Manhattan rents reach record highs amid low supply
New York City in February earned the dubious honor of having the highest annual rent growth of any metro in the U.S.
The median rent for an apartment in New York City climbed to an eye-popping $2,977, up nearly 7% from the same time last year, and more than $1,000 than the current national median.
The dramatic price surge followed a slight dip in multifamily permitting in New York City, which saw 42,230 construction permits issued in 2024, a downtick of 9.5% from 2019.
“We expect rent to continue to rise in the Big Apple for this reason,” notes Berner.
Nine other major metros experienced rising rent prices amid a dearth of permitted multifamily units, including Baltimore, Boston, Detroit, and San Jose, CA.
Some regions are seeing higher inventory, lower rents
It’s not all doom and gloom when it comes to rental supply. The latest data analyzed by Realtor.com researchers showed a lot of regional variation in inventory and rent price levels.
Nine of the top 50 metros experienced a boost in multifamily permitting in 2024 than the previous five years at the same time that rents decreased year over year.
“Where demand is already weakening and supply is expanding, we anticipate more significant downward pressure on rents,” according to Berner.
A typical rental unit in San Diego saw its monthly rate plunge by 6%, to $2,667, after the number of permitted multifamily units in the city jumped by nearly 19% in 2024.
Birmingham, AL, saw a similar trend, with the median rental price dropping by 5.4%, to $1,165, following a 22% upswing in construction permitting.
Although Denver saw a sizable 41% decrease in multifamily construction last year, the city’s median rent experienced the steepest annual drop of all the metros in February, shedding 6.4%, to arrive at $1,773.
Studio units see least rent growth from 2019
Studio rent prices generally tend to be volatile, but in February they matched one- and two-bedroom unit rent growth compared with the same period a year ago, at a level of just above -1%.
A typical studio unit in February had a median rent of $1,413, down 0.8% year over year. Meanwhile, the median rent for a one-bedroom unit was $1,583, while a two-bedroom apartment could be rented for $1,887, with both of those figures representing a 0.7% annual decrease.
“This is due to the market stabilizing in a pattern of consistent price retreat,” explains Berner.
A zoomed-out view reveals that studio units have had the smallest rent growth from five years ago, at 9.7%, as two-bedroom apartments have had the steepest uptick in rents, at 18.3%.
“Stronger long-term rent growth for larger units could be attributed to the fact that fewer young renters are becoming first-time homebuyers amid high home prices and high mortgage rates, and fewer young people are forming independent households likely living with roommates instead, keeping demand for larger rentals elevated,” says Berner.
The 10 metros where rents have fallen the most
1. Denver, CO
Year-over-year change (0-2 bedrooms): -6.4%
Median monthly rent (0-2 bedrooms): $1,773
2. San Diego, CA
Year-over-year change (0-2 bedrooms): -6%
Median monthly rent (0-2 bedrooms): $2,667
3. Birmingham, AL
Year-over-year change (0-2 bedrooms): -5.4%
Median monthly rent (0-2 bedrooms): $1,165
4. Austin, TX
Year-over-year change (0-2 bedrooms): -4.8%
Median monthly rent (0-2 bedrooms): $1,462
5. Riverside, CA
Year-over-year change (0-2 bedrooms): -3.6%
Median monthly rent (0-2 bedrooms): $2,071
6. Raleigh, NC
Year-over-year change (0-2 bedrooms): -3.5%
Median monthly rent (0-2 bedrooms): $1,458
7. Cincinnati, OH
Year-over-year change (0-2 bedrooms): -3.3%
Median monthly rent (0-2 bedrooms): $1,293
8. San Francisco, CA
Year-over-year change (0-2 bedrooms): -3.3%
Median monthly rent (0-2 bedrooms): $2,678
9. Phoenix, AZ
Year-over-year change (0-2 bedrooms): -3.1%
Median monthly rent (0-2 bedrooms): $1,492
10. Cleveland, OH
Year-over-year change (0-2 bedrooms): -3.0%
Median monthly rent (0-2 bedrooms): $1,170