A
partment construction is booming as high rental demand continues to drive the multifamily market. According to a recent report from RentCafe, more than half a million new apartments are expected to hit the market by year's end, marking the third consecutive year of record-breaking apartment construction and the first time surpassing 500,000 completed apartments. This surge in supply is expected to slow rent growth, which would be good news for renters as the average rent for an apartment in the U.S. is currently $1,713. The New York metro area leads the nation in new apartment inventory growth, followed closely by fast-growing markets in Texas like Dallas and Austin.

    Despite this increase in apartment construction, the real estate market is still facing a housing shortage. The new inventory comes at a time when demand continues to outstrip supply, as the renter population has grown significantly over the past 50 years.

    The majority of new apartments are being built in just 20 metros, accounting for nearly 60% of the total new apartments expected this year. By 2028, about 2 million new apartments are expected to hit the market, but there may be a slowdown in the multifamily sector before this goal is reached. According to RentCafe's report, developers are expected to deliver 15% fewer apartments in 2025 compared to 2024's record-breaking year. This decrease in starts is expected to impact completion levels more in the second half of 2025 and even more so in 2026.

    By 2027, apartment construction is predicted to dip to a 10-year low, with only 319,000 rentals opening nationwide. However, after this downfall, researchers forecast an upswing in 2028, which could even see an increase in new units by nearly 23% compared to the prior year. These fluctuations are due to ongoing challenges developers face, including high borrowing costs. As a result, they may focus more on lower-risk projects and shift their focus to markets with the strongest housing demand and job growth.