Rental Market Forecasts for 2025
After a challenging few quarters with high vacancy rates and an oversupply of rental properties, the new year should bring some needed relief.
New Rental Construction Slowing Down
Rental construction is expected to slow significantly in 2025. Multi-family completions are projected to drop by 20%. Rent growth is expected to pick up slightly in 2024, rising 1-3%.
- Expected multi-family property completions for 2024 totaled 533,000 units, a 10% decrease from the 40-year high of 588,000 units in 2023.
- These numbers are expected to decrease even further; at the current pace of starts, the 2026 completion forecast sits at just 250,000 units.
- If demand remains at current levels into 2026, the market could transition quickly from oversupplied to undersupplied, causing vacancy rates to drop swiftly and rent growth to accelerate above historical averages.
Fewer Rent Concessions Expected
In 2025, we are likely to see fewer rent concessions, especially in the latter half of the year. With multi-family construction leveling out after a surge in the last few years, we are likely to see smaller and fewer rent concessions as vacancy rates drop. Instead of offering one or more months free, we are more likely to see smaller concessions, such as lower fees or 50% off the first month.
Renters Are Staying Put
Nearly half (47%) of renters nationwide plan to stay in their current place between mid-2024 and mid-2025 – the highest percentage since 2021. At 901RES, our renewal rates remain high, especially in properties who have not increased rent or increased it a smaller percentage than in years past.
Top Amenities for Renters
According to Zillow, these are the top amenities renters are looking for:
- Off-street parking
- Pet friendly
- In-unit laundry
While these amenities are not always available, especially in downtown condos, we have found that things like offering a credit for parking can help mitigate not having dedicated off-street parking. We also recommend allowing pets in your rental whenever possible, which is why we offer our Pet Damage Guarantee for all properties that are pet friendly. If your unit has washer/dryer connections, but no appliances, you might want to consider adding them to your property this year.
Rent Increases, Affordability, and Renters’ Finances
Over the past year, 2 in 3 renters experienced rent increases over the past year, with apartment buildings seeing the sharpest hikes. Affordability is the number one reason (30%) renters say they plan to move. That said, renewal leases often come with smaller increases, which makes many renters think twice about relocating despite rising costs. Financial stability is a growing challenge for renters:
- Only 55% of renters were able to pay all bills on time in the past year, down from 64% in 2022.
- 77% carry some form of debt.
- 26% have no emergency savings.
We typically advise our owners to keep renewals low, especially with tenants that pay rent on time and plan on staying put for several years.
Online Services Are Becoming Essential
Digital tools are becoming essential for renters. 88% of renters want to handle at least part of their rental process online, from paying rent to submitting maintenance requests. This trend is not just limited to younger generations – 61% of the Silent Generation and 94% of Gen Z and Millennials prefer to manage their rentals online.
- 75% of renters prefer to pay rent online or via card, with 58% already doing so – a 13-point increase from 2021.
- 3 in 4 renters consider access to a resident portal essential for managing their rental
98% of 901RES’s tenants pay online via their portal.
Maintenance Prices Remain High
Labor markets are tight across the globe, a trend that kicked off during the recovery from the Great Recession and looks to worse as populations age and growth slows, according to McKinsey. When the economy grows, more jobs are created, which means higher demand for workers. On top of that, a growing economy means more infrastructure and housing projects, which increases the need for workers with hands-on skills. But since many of these workers are nearing retirement, competition for maintenance and repair roles is heating up, driving wages higher. This trend doesn’t seem to be going away anytime soon.
Current Average Rental Rates
As of December 2024, the Memphis rental market shows the following average rents:
- Studio apartments: Approximately $1,112 per month, reflecting a 12% decrease from the previous year.
- One-Bedroom Apartments: Around $1,160 per month, marking a 9% increase from the previous year.
- Two-Bedroom Apartments: About $1,307 per month, indicating an 18% increase year-over-year.
These numbers are based on multi-family units throughout the Memphis area.
Sources & Further Reading:
- Buildium’s 2025 Rental Market Predictions
- Buildium’s 2025 Property Management Industry Report
- CoStar’s Rental Outlook
- Zillow’s Housing Market Predictions for 2025
Memphis Housing Market Forecasts for 2025
Looking to buy or sell in Memphis this year? Here are some key predictions.
Key Market Highlights
- Median Home Sold Price: $190,593 (up 5.9% from November 2024).
- Median Listing Price: $220,000 (up 10% year-over-year).
- Median Home Value: $241,485 (up 1.6% year-over-year).
- Active Listings: Approximately 2,800 homes (down 8% from last year).
- Days on Market: Homes are selling in just 33 days on average, down from 38 days a year ago.
Neighborhoods like East Memphis and Midtown are seeing higher-than-average price increases due to their proximity to downtown and other amenities. In East Memphis, median home prices have climbed to $280,000, while Midtown homes average $260,000.
House Prices Predicted to Increase
Realtor.com predicts that home prices in Memphis will increase about 3.7% in 2025. They are also predicting mortgage rates to be slightly lower than in 2024 at an average monthly rate of 6.3%. This is quite a bit lower than the high we saw in October 2022 (over 7%), but not even close to the pandemic rates of around 3%. Because of lower inventory, 2025 will likely be a sellers’ market.
Inventory Challenges and New Construction
Memphis faces a tight housing inventory, particularly in the mid-range price segment of $150,000–$300,000. Active listings have dropped 8% year-over-year, increasing competition among buyers.
New construction hasn’t kept pace with demand. In 2023, only 3,000 new housing units were completed in the metro area. This shortfall is driving up prices and making it even harder to find affordable homes.
Sources & Further Reading:
If you have more questions about buying or selling in Memphis, contact our broker, Kendall Haney, at (901) 218-8887 or kendall@kendallhaney.com.