- Jay Parsons' Rental Housing Economics
- Posts
- What I Got Wrong (and Right!) in 2025
What I Got Wrong (and Right!) in 2025
Rolling back the tape on my 10 predictions for apartments and single-family rentals going into 2025. How did I do?
Jay Parsons
December 22, 2025
Today’s edition sponsored by: JPI, Madera Residential, Foxen, Authentic and Lee Consulting Group.
It’s report card time!
As we approach year end, it’s time for some accountability on all those predictions going into 2025. How did we do? We’ll roll back the tape on 10 predictions I made during a podcast episode one year ago. Then we’ll evaluate each prediction versus what actually played out here in 2025. (For those who prefer listening over reading, check out last week’s podcast on this topic — and as a bonus, get the latest on multifamily capital markets trends and outlook with our guest Mike Wolfson, Newmark’s head of multifamily capital markets research.)
Let’s jump in.
Prediction #1: Apartment construction starts are bottoming out
What I said: “I think we’re likely nearing the bottom on apartment starts. Starts are already at 10-year lows... I think we’ll stay within shouting distance of those numbers. A lot of headwinds for developers right now obviously.”
What happened: Some people thoughts starts would keep plummeting, and I was making the point we’d likely hit bottom. So here are those numbers: In terms of market rate apartment starts, we had about 237,000 units started in 2024 according to RealPage. And the most recent data has us a trailing-12 month total of 235,000 units.
Verdict: Nailed this one.
Prediction 2: Apartment demand will remain strong
What I said: “I think we’ll continue to see strong demand for apartments … maybe a bit lower than 2024, but still good.” (Note: We were talking about demand in terms of NET ABSORPTION, or renter household formation – not leasing velocity.)
What happened: Those numbers did indeed remain strong. Calendar year 2025 is on track to be one of the best years on record for absorption, but still a bit below 2024 as expected.
Verdict: Got this one right. This was a more mainstream view. Among those who missed it, they likely underestimated the historical relationship between supply and absorption.
Prediction 3: Wage growth will outpace rent growth again
What I said: “I think affordability will be a demand tailwind. Wage growth has outpaced rent growth for 2 years, and I think that’ll happen again in 2025 – though that spread will likely compress. That should keep rent-to-income levels stable or maybe even drop down a bit more, at least for market-rate, professionally managed apartments.”
What happened: Wage growth has far surpassed rent growth in 2025. The latest wage growth data from the Atlanta Fed’s U.S. wage tracker shows growth of 4.1%, and that compares to effective rent growth for apartments around 0% and SFR rent growth around 2%. So that’s a win for affordability, a win for the widening demand funnel as well.
Verdict: This is one that I thought would be rather obvious (and turned out to be true), but I think others are sometimes hesitant to call out for whatever reason. If anything, I was surprised by still-wide margin between wage growth and rent growth. (More on rents in a bit.)
Prediction #4: Operators will continue to prioritize occupancy over rent
What I said: “I think we’ll continue to see property managers prioritize occupancy over rents in most markets. That means a heavy focus on retention. I was wrong about retention in 2024. I thought it’d go down given the increased number of options renters had in 2024 with rising supply and vacancy. So maybe I’m foolish for doubling down but I think retention rates have to tick down a bit in 2025, particularly as concessions burn off and some renters will choose to chase another concession or better deal somewhere else.”
What happened: Operators did indeed continue to prioritize occupancy over rent. That became the strategy essentially universally, with heavy emphasis on “heads on beds” amidst the highest supply wave in a half century. AND retention rates went up another 140 bps nationally, even with renters (usually) paying a premium to do so.
Verdict: Well, we got the big picture strategy right but missed on the retention subplot, in large part because concessions went UP, not down, as operators fought for occupancy. Some backstory: In my predictions above for 2025, I was joking that I was wrong about retention in 2024. Of course, it went up in 2024 even with massive new supply numbers giving renters a huge number of alternative options. Going into 2025, I doubled down on my bad guess. I was wrong. The high retention numbers are one of the big stories of this cycle, even pre-dating the rise in mortgage rates. Remember: Regardless of mortgage rates, people will usually move out (to another rental) if they’re unhappy in their current rental. So we can credit all the other stuff you want, but at the end of the day, you have to tip your hat to property managers who did their job well.
Prediction #5: Apartment rents will grow by low single digits
What I said: “I could see a pretty broad range of possibilities – anywhere from flat to maybe even mid-single digits in a bull-case scenario. My guess is we’ll end up in the low single-digits on rent growth for 2025. But I really do think the range of possible outcomes in bigger than usual in 2025, and that’s just because this is an inflection point – a transition year – given the shifting trends in supply right now.”
What happened: We’re right around 0% rent growth right now. Some data providers show a very mild increase, others show a slight decrease. We’ll round it to zero.
Verdict: This one was a miss. (No points for giving a broad range!) I wasn’t bullish by any means, but like most of you, I thought we’d see 1-2% rent growth in 2025. Much of this miss was driven by the increased use of concessions (as operators fought to protect occupancy), choosing that strategy over outright cuts, but the net effect was the same.
Prediction #6: Midwest and Coasts will beat Sun Belt again on rents
What I said: “Of course, rent growth will vary a lot by market. I think we’ll see another year of atypical coastal and Midwest outperformance over the Sun Belt.”
What happened: That happened as expected. Coastal markets (especially Northeast + Bay Area) and the Midwest dominated the rent growth leaderboard, while most Sun Belt markets continued to cut rents a bit.
Verdict: OK, that was an easy one. A lot less supply to wrestle with on the coasts and the Midwest, so we continued to see better rent growth there.
Prediction #7: Apartment sales volumes will pick up moderately
What I said: On sales volumes, “the numbers in the second half of 2024 appear on track to top 2023’s second half, so we could be turning a corner leading to a moderate pickup in deal flow versus 2024.”
What happened: Year-to-date sales volumes are up about 9% compared to the same time last year.
Verdict: I think +9% qualifies as a moderate pickup, right? That was another pretty mainstream view, not a big surprise.
Prediction #8: Apartment distress will remain limited
What I said: “We’ll likely see more distress emerge in 2025, and it’ll make a lot of noise, but it’s going to represent only a small share of the market. The vast majority of U.S. multifamily will be just fine. And furthermore, I think much of that distress won’t match the buy box for investors looking to buy distress. Everyone wants newer vintage, well located apartments with minimal capex needs. But strong appetite for that product will limit distress and put downward pressure on cap rates.”
What happened: Distress continues to tick upward, but does indeed still represent a small share of the market. Of the $2.2+ trillion multifamily debt market, Newmark’s estimates show distressed loans comprise a single-digit share. And, indeed, we continued to see that the typical profile of distressed deals did not match the buy box for active buyers.
Verdict: This one may seem a bit subjective, but I think we got the storyline right. Distress sales certainly happened, but not to a needle-moving number. Foreclosures remained pretty limited, but they didn’t really move the market either. Apartment pricing did improve a bit in 2025, didn’t get pulled down by distress. But of course, still some stuff to work through in 2026.
Prediction #9: SFR acquisitions will remain muted
What I said: “Any pick up in SFR investor acquisitions I think would be rather modest. And for the bigger players, I think they’ll continue to focus on build-to-rent construction and portfolio acquisitions over buying individual homes off the MLS.”
What happened: John Burns data shows large SFR investors purchased about 3,000 homes last year, which was about 0.5% of home sales. The current T-12 data shows us right at the same numbers. So, not a lot of buying activity. And a bigger share of SFR capital continued to move into BTR – whether dedicated BTR communities or “excess inventory” from homebuilders.
Verdict: Easy W. Sticky home prices and elevated rates sidelined not only individual homebuyers, but investors too. No real surprise for anyone paying attention to realities and not conspiracy theories.
Prediction #10: SFR rent growth will slow from high 3s to ~3%
What I said: “A slow for-sale housing market is ABSOLUTELY NOT a strong demand tailwind for SFR demand (and therefore rents). Usually, the two are more correlated … John Burns is forecasting 3.1%, which would be down from the current number of 3.7% and would be the lowest since 2013, when SFR rents grew 2.5%. I think that’s a reasonable outlook.”
What happened: SFR rent growth did indeed slow, but down to around 2%.
Verdict: I’m annoyed with this one because I got the direction right (remember headlines saying SFR rent growth would accelerate because no one could buy a house?), but I missed on the magnitude by a full percentage point. In hindsight, I didn’t have enough conviction in my conviction. When others said SFR demand would boom because no one was buying houses, I said the opposite. I noted that the lack of home sales is a headwind for SFR because SFR sees more rent growth when homes are appreciating and selling. Just as a rising tide boosts all ships, a receding tide pulls back all ships. When homes aren’t selling, that’s usually a sign of weaker economic activity and slower household formation – which means it takes longer to backfill vacancies, which in turn puts downward pressure on rents. So we got that part right, but just didn’t go far enough on the impact to rents.
— My Latest Posts on LinkedIn —
Here are some recent posts if you missed them:
CPI rent inflation fell below 3% for the first time since the pandemic. While the CPI did have some data collection issues, there’s no doubt that rent growth (in the real world, too) continues to cool off.
Aimco — once the nation’s largest apartment owner — sold off one of the remaining fragments of its portfolio and it winds down toward liquidation.
Atlanta is looking like an early frontrunner in the search for green shoots of recovery in the supply-drenched Sun Belt.
Kudos to The Wall Street Journal (news section, not op-ed!) for spelling out how rent control has backfired in St. Paul, Minnesota.
After enacting rent control in July 2024, the affluent D.C. suburb of Montgomery County (MD) has seen multifamily building permits go poof.
Apartments built since 2010 represent just 22% of the U.S. stock, and yet 52% of apartment sales. Add in properties built in the 2000s, and that share of sales surges to 67%. Investors today highly prefer newer vintages.
The Federal Trade Commission fired off a warning shot to all apartment and single-family operators on the topic of fee transparency.
Are apartment market surveys, aka “call arounds” dead? It appears so.
Here’s the story of a woman who moved into an apartment 30 years ago, took a job as a leasing agent, and now is set to head up U.S. property management for the world’s largest apartment operator.
Today's high cost of homeownership contributes to Americans renting longer, but don't make the mistake of thinking this is a new phenomenon of the higher-rate era. It's not.
— Now Spinning on The Rent Roll Podcast —
For 2025, The Rent Roll with Jay Parsons podcast ranked in Spotify’s top 2% of podcasts for minutes played and in the top 1% for most shared shows. Additionally, The Rent Roll continues to frequently rank on Apple’s charts for investing-themed podcasts, and was recently ranked as the third-best podcast in all commercial real estate (and #1 in housing) by the readers of CRE Daily!
Thank you to everyone who’s made The Rent Roll part of your weekly routine! New episodes are released every Thursday morning. No episode this week due to Christmas week, but we’ll be back on January 1 with our 2026 predictions alongside John Burns himself of John Burns Research & Consulting.
Episode 64: What I Got Wrong (and Right!) in 2025 … Plus a multifamily capital markets update with Newmark’s Mike Wolfson
Episode 63: Green Shoots in Multifamily? Maybe. With CAPREIT’s Andrew Kadish
Episode 62: How Greystar Sees Property Management with Greystar’s Toni Eubanks
Episode 61: A.I. and Rental Housing with Funnel’s Tyler Christiansen
Episode 60: Overlooked Tertiary Markets with Centerspace’s Anne Olson
Episode 59: 5 Takeaways from the SFR REITs’ Q3’25 Earnings Calls Plus a Conversation with Progress Residential’s CEO, Dave Feldman
Episode 58: 5 Takeaways from the Apartment REITs’ Q3’25 Earnings Calls with Mizuho Americas’ Haendel St. Juste
