#United States #Austin #Realtor.com #Tariffs #construction costs

Challenges Ahead for U.S. Renters

The U.S. rental market has recently seen a decline in rent prices for the 24th consecutive month, reflecting two years of easing rental pressures. Yet, while renters may feel a bit of relief, forecasts show that rising construction costs and new tariffs could signal imminent challenges for future rental availability.

Current Rental Landscape

According to a report from Realtor.com, the median asking rent for properties with 0-2 bedrooms dipped to $1,712 in July, marking a decline of $43 (or 2.5%) from the previous year. While this trend appears beneficial for renters, who have gained additional negotiating power, it conceals underlying issues. The current rental prices are still $254 (17.4%) above pre-pandemic levels, although they are now $47 (or 2.7%) lower than the peak achieved in August 2022.

Danielle Hale, Chief Economist at Realtor.com, stated, "Rents have now declined for two full years, giving renters more leverage and financial breathing room than they've had in some time." However, she cautioned that the declining trend might not continue indefinitely, especially as developers begin to retreat in critical markets due to rising costs and tariffs impacting essential materials like aluminum and steel.

Multifamily Development Decline

The decline in rent prices correlates with a significant decrease in multifamily construction. In June 2025, multifamily completions dropped by 38.1% year-over-year, from a seasonally adjusted annual rate of 656,000 units in June 2024 to just 406,000 units. This sharp decline reflects larger challenges such as elevated construction costs and reduced profit margins due to lower rent rates.

Certain regions are feeling the impact of this downturn more acutely than others. For instance, the Midwest experienced the steepest drop in completions at 55.7%, followed closely by the South at 33.5%. The Northeast and West also saw significant reductions in multifamily unit completions.

Permitting Trends and Future Implications

Further complicating the landscape, many metro areas are witnessing a slowdown in permitting activity, which forecasts tighter rental supplies. Noteworthy drops include:

• - Orlando, Florida: -54.9% in multifamily permits from Q1 to Q2 2025.
• - Philadelphia, Pennsylvania: experienced its first permit dip in three years.
• - San Antonio, Texas: marked a significant decline as well.

While these initial phases of permitting drops may signal early adjustments to worsening conditions from developers, the effects will likely manifest in a scarcity of new rental units moving forward.

Hale mentions, "If construction pullbacks continue, today's renter-friendly market could give way to a tighter, more competitive landscape." This signifies the highlighted trends warrant continued monitoring to understand how they will influence both renters and developers in the months ahead.

Seasonal Rent Trends

As is typical, rent prices usually experience rises in spring and summer. However, the growth this year has paled in comparison to previous years, with a mere 1.2% increase year-to-date against a robust 2.8% growth in the same period in 2024. While renters enjoy more short-term affordability, the drastic fall in multifamily completions and the early signs of permitting slowdowns hint at shifting market dynamics that could develop later this year or in 2026.

Given these shifting dynamics, it remains imperative for potential renters and developers to remain vigilant and adapt as market conditions evolve. Realtor.com will continue to monitor these changing factors and their implications for the rental market and construction industry.