Though some U.S. multifamily markets still face challenges from elevated supply pipelines and rising costs, the sector as a whole is finding a new equilibrium in mid-2025, with improving demand bringing the national vacancy rate down for the first time in more than three years.
While annual asking rent growth plateaued at 1%, it's also poised for a comeback as a historic wave of apartment construction passes its peak. The pace of the recovery varies by market, with some metropolitan areas still encountering hurdles as others see fundamentals, such as vacancy and rental rates, stabilize or even strengthen.
CoStar’s market analytics team has developed a new momentum index ranking the top 48 U.S. markets with more than 100,000 apartments to identify where the sector is gaining the most ground.
Rather than ranking the markets with the strongest current performance, the momentum index identifies the most improved apartment markets. The criteria includes the change in the pace of rent growth, decline in vacancy rate, decline in the under-construction pipeline, and demand momentum as measured by net absorption, or units occupied minus units vacated, as a percentage of total inventory.
A look at the Top 10 markets reveals the breadth of the multifamily market’s recovery. Though the influx of new apartments — and subsequent increase in competition for tenants — has kept rent growth negative in many Southeastern markets, a substantial slowdown in construction, coupled with near-record levels of demand, has improved the outlook considerably.
As a result, markets such as Jacksonville, Florida; Atlanta, Georgia; and Raleigh in North Carolina are among the highest ranked. Similarly, several West Coast markets have seen substantial improvement in rent growth as tech market hiring has collided with low availability in places such as San Francisco and Seattle. In Minneapolis, the one Midwestern outlier among the Top 10, consistent demand and slowing supply led to growing rents.
Florida’s resilience
Three Florida markets — Jacksonville, Tampa and Orlando — landed in the Top 10, highlighting the state’s resilient demand.
Jacksonville surged to the top of the list thanks to a sharp drop in vacancy due to a large increase in demand from continued job and population growth. Tampa and Orlando also benefited from strong job creation in healthcare, logistics and tourism, helping demand catch up with a spike in new construction. Tampa is one of the few large markets nationally to post an improvement in annual rent growth over the past year.
“The impact of recent population growth on multifamily demand in Central and North Florida has been significant and cannot be overstated,” said Lisa McNatt, CoStar’s Orlando and Jacksonville director of market analytics. “In Orlando and Jacksonville, a strong pace of in-migration for several consecutive years expanded the number of residents by roughly 9% from April 2020 through July 2024. Tampa has grown by closer to 8% during that period.
"The growing number of new residents, along with a robust pace of renter demand, limited new housing supply and elevated interest rates for mortgage seekers, has created both a housing crunch and an affordability gap that should continue to fuel healthy demand for apartments in the year ahead.”
Tech market rebounds
San Jose and San Francisco in Northern California, as well as Seattle, are showing signs of a turnaround after a challenging few years. These high-cost West Coast markets were hit hard by remote work and out-migration, but 2025 has brought a shift.
Leasing has picked up, particularly in urban cores, and rents are on the rise, according to CoStar data. San Jose’s absorption numbers were among the most improved in the country, while San Francisco saw a notable drop in vacancy and a nation-leading increase in rent growth year to year.
“A surge in leasing by artificial intelligence companies "has drawn new residents into the core urban area, and efforts to improve crime and other negative street conditions have started to pay off" in San Francisco,” said Nigel Hughes, senior director of market analytics for the Bay Area. “Accordingly, the market vacancy rate has shrunk about as low as it can get, and that's allowing owners to push rents higher.”
Further south in California, the often-overshadowed Inland Empire has also continued to perform well. The region’s affordability relative to Los Angeles and Orange County, combined with strong logistics and warehousing employment, has kept demand steady. Vacancy declined over the past year, and absorption remained strong.
“Population growth has reached its highest point in over five years, fueling demand for rental units,” said Jesse Gundersheim, CoStar’s senior director of market analytics for the region. "This heightened demand has resulted in absorption rates comparable only to those observed during the peak of the pandemic in mid-2020.”
Southeastern strength
Atlanta and Raleigh continue to shine as economic powerhouses in the Southeast. Atlanta’s momentum was driven by a combination of strong absorption and a slowdown in construction, while Raleigh saw one of the largest year-over-year improvements in supply relief, or the decline in the percentage of inventory under construction compared to a year ago.
Both markets are benefiting from corporate relocations, a growing tech presence and a steady influx of new residents seeking affordability and quality of life.
Newcomers to the Southeast "are often seeking lower living and business costs compared to East and West Coast markets,” said Madelyn Bearn, CoStar's associate director of market analytics in Atlanta. “Part of the draw is jobs. Atlanta has become known as a corporate relocation magnet. After a pause in the wake of the pandemic, companies, including Duracell and StubHub, have been announcing new office locations in Atlanta at an impressive clip.”
Midwest outlier
Minneapolis may not be the first market that comes to mind when thinking of multifamily momentum, but it quietly posted gains across all four index components.
With limited new construction and stable demand, the market saw a meaningful drop in vacancy and strong rent growth. Its inclusion in the Top 10 reflects a broader trend of overlooked markets gaining ground as investors and renters seek alternatives to pricier coastal cities.
“A deeply entrenched labor shortage has kept wage growth above multifamily rent growth for 20 consecutive quarters, keeping rent-to-income ratios among the lowest in the nation,” said Brian Anderson, CoStar’s Minneapolis-based director of market analytics. “Not only does that bolster household formation, but it gives landlords plenty of runway for outsized rent growth in the coming years.”
With the national construction pipeline emptying rapidly amid strong demand conditions, the large imbalances experienced from 2022 to 2024 are abating. The national vacancy rate has reached a tipping point and is forecast to decline further as completions are set to drop nearly in half in 2025.
Many markets appear well-positioned to achieve improved rent growth and occupancy in 2025, should macroeconomic uncertainty abate and job growth continue.
