EP293: How to Profit in 2025 From Apartment Boom Even as Job Growth Slows

APPLE PODCASTS | SPOTIFY

Something crazy is happening in the U.S. apartment market, and it’s flipping all those expert predictions on their heads. But here’s the kicker—it’s not where you’d expect.

If you’re renting, investing, or just curious about what shapes where we live, this one’s for you. Let’s dive into the trends shaping the rental market as we wrap up 2024 and head into 2025. By the end of this, you’ll know exactly what’s driving these changes and what it means for you.

Demand Surge: The Market That Won’t Quit

Remember all that chatter about an oversupply of apartments?  🏢

The flood of new units everyone was bracing for? Yeah, that didn’t happen.

Instead, demand has been skyrocketing, shattering records in some markets.

In Q4 2024 alone, 230,819 units were absorbed—bringing the total annual demand to a jaw-dropping 666,699 units, the highest since early 2022.

Even with new construction booming, demand is keeping up. What does that tell us? This market is stronger than anyone expected.

The Texas Boom: Why Everyone’s Moving South

If there’s one place that’s stealing the show, it’s Texas. 🤠🤠

• Dallas absorbed a massive 36,724 units in 2024, making it the top city in the country.
• Houston wasn’t far behind, with over 31,000 units.
• Austin and Fort Worth also outperformed expectations.

So, what’s the deal with Texas? It’s a mix of strong job growth, affordability (relative to other regions), and that undeniable southern charm.

But Texas isn’t the only place seeing this surge.

Unexpected Hot Spots: Washington, Vegas, and Indy

Other cities are also thriving.

• Washington, D.C. saw demand outpace new supply by over 7,700 units in 2024.
• Las Vegas, Los Angeles, and Indianapolis all experienced higher demand than new construction could keep up with.

In these cities, occupancy rates are climbing, and renters are locking in leases faster than landlords can build.

What’s Fueling This Surge?

So why the sudden rental boom? It’s not just people chasing warm weather.

Several factors are driving this ⏬

1. Job Growth: While it’s slower than in previous years, it’s still steady, keeping the economy stable.
2. Rising Wages: In many markets, wages are growing faster than rents, making housing more affordable.
3. Better Rent-to-Income Ratios: These are back to pre-COVID levels, easing financial strain for renters.

Add in cooling inflation and a boost in consumer confidence, and you’ve got renters feeling optimistic enough to make moves—literally.

The Backdoor Strategy: Retaining Good Tenants

Property owners are getting smart about keeping their buildings full. It’s not just about attracting new tenants but retaining the ones they already have.

Why? Because holding onto a reliable, rent-paying tenant is often more valuable than risking vacancies or chasing higher rents. Renewals went up in 2024, and landlords are offering more concessions, making renting even more appealing.

The Rise of Build-to-Rent (BTR): A Game-Changer

Here’s where things get even more interesting: Build-to-Rent (BTR) communities are exploding. 💥

What’s the difference between BTR and traditional single-family rentals?

• Traditional Single-Family Rentals: Individual houses owned and rented out by a person or company.
• BTR Communities: Entire neighborhoods designed and built specifically for renting, complete with shared amenities and a focus on community.

Our current project, a 118-unit townhome BTR community north of Dallas, is part of this trend.

These communities are popping up everywhere, especially in the South and West, offering a middle ground between apartment living and homeownership.

Why BTR Is Thriving

With mortgage rates hovering between 6% and 8%, buying a home feels out of reach for many. Enter BTR:

• It offers the privacy and space of a single-family home without the financial burden of a mortgage.
• It attracts renters who value community, good school districts, and amenities like gyms, pools, and walking trails.
• It’s perfect for those who want flexibility without long-term commitments.

The Road Ahead: What’s Next for 2025 and Beyond?

Looking forward, we’re expecting new apartment construction to level off.

Developers are facing economic challenges, and this slowdown could lead to housing shortages in some areas after 2025.

For renters, this could mean more power to negotiate in oversupplied markets where landlords are competing to fill units. But in high-demand areas with limited new construction, rents could climb—think 2010s all over again.

Rent Prices: What to Watch

As the supply of new apartments eases, rent prices will depend heavily on local market dynamics:

• Oversupplied Markets: Look for landlord concessions and lower rents.
• Undersupplied Markets: Expect rents to rise, especially in cities with strong job growth and little new construction.

Why Local Knowledge Matters

National trends are helpful, but they don’t tell the full story. What’s happening in Dallas might be completely different from DC or LA. Understanding local market conditions is key—whether you’re renting, investing, or developing.

The Bigger Picture

The U.S. apartment market is undergoing a fascinating transformation. Demand is surging, BTR communities are reshaping housing, and regional differences are more pronounced than ever.

Whether you’re a renter, a landlord, or an investor, staying informed about these trends isn’t just helpful—it’s essential.

What do you think about these shifts? Are you ready to adapt and thrive in this ever-changing market? Let me know in the comments—I’d love to hear your thoughts!