The multifamily market is entering a new phase of uncertainty. Third-quarter earnings from four leading apartment REITs—AvalonBay, Camden, Equity Residential, and UDR—signal softer demand, slower rent growth, and heightened caution heading into winter. For builders and developers, these trends matter because they influence capital flows, land strategies, and long-term rental housing demand.
Demand Pullback and Retention Dynamics
Apartment leasing typically cools in the fourth quarter, but this year the slowdown arrived early. Operators attribute the shift to weak job growth, macroeconomic jitters, and even chatter about a federal government shutdown. Equity Residential summed it up: “Everything this year feels like it was pulled forward.” RealPage data also backs up this sentiment, showing absorption in Q3 well below historical norms.
Yet, Camden reminded investors that 2025 still ranks among the best absorption years in decades. The takeaway? Demand isn’t collapsing. Rather, it’s recalibrating after a strong first half.
At the same time, turnover has plummeted. Camden reported move-outs to buy homes at just 9.1%, a historic low, while Equity Residential saw average length of stay jump nearly 20% compared to 2019. Affordability is the driver: renting remains far more favorable than homeownership, especially with mortgage rates stubbornly high.
This retention story matters because it shapes rent growth. Renewal rates posted gains of 3% to 4.5%, while new lease rates turned negative in Q3, ranging from -0.1% at AvalonBay to -2.6% at UDR. For builders, this dynamic underscores how stability, not aggressive pricing, can define operator strategies.
Occupancy Holds, But Pricing Power Slips
Occupancy remains healthy, hovering around 95% to 96% across portfolios. But maintaining those levels came at a cost: concessions ticked higher, particularly in oversupplied Sunbelt markets. Operators have had to prioritize retention and occupancy over pushing rents, which is a strategy that could influence how developers model lease-up timelines and revenue projections.
Financial Health and Supply Relief Offer Hope
Despite softer demand, renter financial health remains robust. Equity Residential reported rent-to-income ratios below 20%, with new resident incomes up 6.2% year-over-year. Camden noted that wages have outpaced rents for nearly three years. This resilience suggests that once supply pressures ease, rent growth could rebound.
And supply relief is coming. AvalonBay expects deliveries in its markets to fall to levels not seen since 2012. Camden projects completions dropping from 190,000 units in 2025 to 150,000 in 2026—and even lower in 2027. Fewer lease-ups mean less pricing pressure and a healthier market equilibrium.
What It Means for Builders
For single-family builders, the message is clear: rental demand remains structurally strong, even amid short-term volatility. Record retention and affordability advantages suggest that build-to-rent and single-family rental strategies will continue to attract capital. But timing matters. Expect near-term softness in rent growth and concessions, with fundamentals improving in 2026.
The insights in this article were taken from more in-depth research reports published in Zonda’s National Outlook.
