Tariffs and Rising Construction Costs Could Signal Trouble Ahead For Rents - Despite Two Years Price Declines

Rhea-AI Summary

Realtor.com (NASDAQ:NWSA) reports that U.S. rental prices have declined for 24 consecutive months, with median asking rent falling to $1,712 in July 2025, representing a 2.5% year-over-year decrease. However, concerning trends are emerging in the construction sector, as multifamily completions plummeted 38.1% year-over-year to 406,000 units in June 2025.

The decline in development is particularly severe in the Midwest (-55.7%), followed by significant drops in the South (-33.5%), Northeast (-33.0%), and West (-28.9%). Major markets like Orlando (-54.9%) and Charlotte (-54.8%) are experiencing substantial quarterly permitting declines. New tariffs on steel and aluminum, combined with rising construction costs and shrinking profit margins, suggest potential future supply constraints despite current rental market cooling.

Positive

• Rent prices have declined for 24 consecutive months, providing relief to renters
• Current median rent of $1,712 is 2.7% below peak levels from August 2022
• Year-to-date rent growth is softer at 1.2% compared to 2.8% in 2024

Negative

• Multifamily completions dropped severely by 38.1% year-over-year to 406,000 units
• New doubled tariffs on steel and aluminum are increasing construction costs
• Major markets showing significant permitting declines, signaling future supply constraints
• Despite recent declines, rents remain 17.4% above pre-pandemic levels

Insights

Real Estate Market Analyst

Two-year rent decline continues but construction pullbacks and tariffs threaten future rental supply, potentially reversing the renter-friendly market.

The US rental market has experienced 24 consecutive months of price declines, with July's median asking rent for 0-2 bedroom properties in the 50 largest metros falling to $1,712, a 2.5% year-over-year decrease. While this represents continued relief for renters, the market faces concerning structural shifts that could reverse this trend.

The most significant development is the dramatic 38.1% year-over-year decline in multifamily completions for buildings with two or more units, plummeting from 656,000 units to just 406,000 units annually. This construction pullback is geographically uneven, with the Midwest experiencing the steepest decline at 55.7%, followed by the South (33.5%), Northeast (33.0%), and West (28.9%).

The permitting data across major metros reveals early warning signs of further supply constraints. Orlando saw permits for multifamily units plunge 54.9% from Q1 to Q2 2025, while Charlotte experienced a 54.8% decline. Even markets with positive growth like San Francisco are showing their slowest Q2 permitting growth in three years.

This construction pullback stems from three primary factors: elevated construction costs, compressed profit margins from lower rents, and newly expanded tariffs on imported building materials like steel, aluminum, and lumber. These tariffs, doubled in June, will likely exacerbate construction headwinds and further reduce new supply.

Despite rents remaining 17.4% above pre-pandemic levels, they've fallen 2.7% from their August 2022 peak. The year-to-date rent growth of 1.2% is significantly lower than the 2.8% growth seen during the same period in 2024.

This data indicates we're at an inflection point in the rental market cycle. While renters currently enjoy more leverage and financial breathing room than they've had in years, the supply-side constraints suggest this renter-friendly environment may be time-limited. The sharp reduction in new construction will eventually create supply shortages, potentially reversing the two-year trend of declining rents.

The impact is being felt across the country as the Midwest saw the steepest annual drop in completions, followed by the South.

AUSTIN, Texas, Aug. 12, 2025 /PRNewswire/ -- Rent prices declined for the 24th month in a row in July, marking a full two years of easing rental pressure in the U.S. rental market. At the same time, a growing pullback in multifamily development driven by rising construction costs and new tariffs on key materials like aluminum and steel is signaling potential trouble ahead for future rental supply, according to the July Realtor.com^® Monthly Rent Report.

The median asking rent for 0–2 bedroom properties in the 50 largest metros fell to $1,712 in July, a $43 (-2.5%) decline compared to the same time last year. While monthly rent growth continues to follow a typical seasonal pattern, it has consistently lagged behind last year's pace, indicating a persistently cooler rental market. Rent prices remain $254 (17.4%) higher than their pre-pandemic levels, but are now $47 (-2.7%) below the peak reached in August 2022.

"Rents have now declined for two full years, giving renters more leverage and financial breathing room than they've had in some time," said Danielle Hale, Chief Economist at Realtor.com^®. "But there are early signs that relief may not last forever. Developers are pulling back in key markets, and construction headwinds—especially tariffs on steel, lumber and aluminum—could create a shortfall in new rental supply down the line."

Multifamily Development Pulls Back Sharply
In June 2025, multifamily completions for buildings with two or more units fell 38.1% year-over-year, dropping from a seasonally adjusted annual rate of 656,000 units in June 2024 to just 406,000. This significant decline reflects the growing challenges facing developers, including elevated construction costs, shrinking profit margins due to lower rents, and newly expanded tariffs on imported building materials.

The impact is being felt unevenly across the country. The Midwest saw the steepest annual drop in completions (–55.7%), followed by the South (–33.5%), Northeast (–33.0%), and West (–28.9%).

Disrupted Local Permitting Trends with New Higher Tariffs Signals More Pull Backs Ahead
Permitting trends across large metro areas show that some markets are already feeling the effects from higher construction costs and compressed profits:

• Orlando, Fla.: Permits for multifamily units dropped -54.9% from Q1 to Q2 2025—the first Q2 decline since 2022.
• Philadelphia, Pa. and San Antonio, Texas also saw their first Q2 permitting dips in three years.
• Charlotte, N.C. and Las Vegas, N.V. experienced their largest quarterly permitting declines in Q2 since 2022.
• Even San Francisco, Calif., which saw a modest increase, posted its slowest Q2 growth in permitting in three years.

These local slowdowns suggest that developers are responding to worsening conditions by reducing plans for new projects—an early warning sign that the supply of new rental units could tighten over time. Looking ahead, the doubled tariffs on imported steel and aluminum announced in June could make this condition worse.

"If construction pullbacks continue, today's renter-friendly market could give way to a tighter, more competitive landscape," said Hale. "It's a trend we'll be watching closely, especially in markets that had previously led the way in multifamily development."

Table: Markets With Disrupted Permitting Trends

Market	5 Units or More, 2025Q2	% Diff 2025q2 vs. 2025q1	% Diff 2024q2 vs. 2024q1	% Diff 2023q2 vs. 2023q1	% Diff 2022q2 vs. 2022q1
Orlando-Kissimmee-Sanford, FL	2251	-54.9 %	66.9 %	44.5 %	12.6 %
Philadelphia-Camden- Wilmington, PA-NJ-DE-MD	937	-28.1 %	18.9 %	27.9 %	72.7 %
San Antonio-New Braunfels, TX	420	-27.3 %	8.3 %	57.7 %	19.2 %
Charlotte-Concord-Gastonia, NC-SC	970	-54.8 %	178.3 %	35.6 %	-19.8 %
Las Vegas-Henderson-North Las Vegas, NV	926	-34.3 %	60.7 %	-0.9 %	-15.0 %
San Francisco-Oakland- Fremont, CA	1346	15.9 %	100.9 %	85.4 %	38.5 %

Rent Trends by Unit Size
While rent prices typically rise during spring and summer, this year's seasonal lift has been softer than usual. As of July, rents were up just 1.2% year-to-date, compared to 2.8% growth over the same period in 2024.

Despite near-term affordability gains for renters, the sharp drop in multifamily completions and early signs of weakening permitting activity may shift market dynamics later this year or in 2026. Realtor.com^® will continue to monitor construction trends and policy changes to track the evolving landscape for renters and developers alike.

Table: National Rents by Unit Size, July 2025

Unit Size	Median Rent	Rent YoY	Consecutive  Months of Decline	Total Decline from Peak	Rent Change - 6 Years
Overall	$1,712	-2.5 %	24	-2.7 %	17.4 %
Studio	$1,428	-1.4 %	23	-4.0 %	13.5 %
1-Bedroom	$1,590	-2.8 %	26	-4.1 %	15.6 %
2-Bedroom	$1,898	-2.3 %	26	-3.1 %	19.0 %

 

	Median Asking Rent	YOY	Six Year Changes	# Permits for Buildings with 5+ Units, 2025Q2
Atlanta-Sandy Springs-Roswell, GA	1,576	-4.3 %	10.2 %	2408
Austin-Round Rock-San Marcos, TX	1,460	-5.3 %	15.5 %	2706
Baltimore-Columbia-Towson, MD	1,827	-0.1 %	15.1 %	691
Birmingham, AL	1,202	-3.8 %	14.2 %	122
Boston-Cambridge-Newton, MA-NH	2,993	-1.5 %	14.7 %	1396
Buffalo-Cheektowaga, NY	NA	NA	NA	104
Charlotte-Concord-Gastonia, NC-SC	1,519	-1.5 %	15.6 %	970
Chicago-Naperville-Elgin, IL-IN	1,785	-2.4 %	12.7 %	2270
Cincinnati, OH-KY-IN	1,312	-4.4 %	15.5 %	408
Cleveland, OH	1,229	-2.0 %	25.5 %	271
Columbus, OH	1,225	-0.6 %	22.5 %	3473
Dallas-Fort Worth-Arlington, TX	1,458	-2.6 %	15.4 %	8649
Denver-Aurora-Centennial, CO	1,783	-7.7 %	7.3 %	2706
Detroit-Warren-Dearborn, MI	1,297	-2.1 %	11.4 %	868
Hartford-West Hartford-East Hartford, CT	NA	NA	NA	158
Houston-Pasadena-The Woodlands, TX	1,352	-3.6 %	8.4 %	3804
Indianapolis-Carmel-Greenwood, IN	1,298	-2.9 %	30.6 %	833
Jacksonville, FL	1,499	-4.3 %	26.0 %	804
Kansas City, MO-KS	1,404	3.2 %	27.4 %	1360
Las Vegas-Henderson-North Las Vegas, NV	1,471	-2.9 %	22.8 %	926
Los Angeles-Long Beach-Anaheim, CA	2,751	-3.2 %	11.7 %	3605
Louisville/Jefferson County, KY-IN	1,253	-4.9 %	20.7 %	940
Memphis, TN-MS-AR	1,186	-3.3 %	15.0 %	35
Miami-Fort Lauderdale-West Palm Beach, FL	2,332	-2.9 %	36.3 %	5489
Milwaukee-Waukesha, WI	1,662	-1.5 %	15.5 %	288
Minneapolis-St. Paul-Bloomington, MN-WI	1,514	-2.6 %	3.1 %	1398
Nashville-Davidson--Murfreesboro--Franklin, TN	1,531	-3.7 %	22.4 %	905
New Orleans-Metairie, LA	NA	NA	NA	95
New York-Newark-Jersey City, NY-NJ	2,889	0.0 %	26.0 %	7166
Oklahoma City, OK	985	-2.9 %	7.1 %	540
Orlando-Kissimmee-Sanford, FL	1,694	-1.4 %	21.8 %	2251
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	1,771	-2.7 %	9.1 %	937
Phoenix-Mesa-Chandler, AZ	1,491	-5.4 %	23.5 %	3747
Pittsburgh, PA	1,490	2.3 %	42.3 %	340
Portland-Vancouver-Hillsboro, OR-WA	1,693	-4.5 %	16.2 %	946
Providence-Warwick, RI-MA	NA	NA	NA	191
Raleigh-Cary, NC	1,498	-4.6 %	24.0 %	1563
Richmond, VA	1,526	-0.5 %	26.2 %	1016
Riverside-San Bernardino-Ontario, CA	2,040	-5.7 %	14.6 %	1661
Rochester, NY	NA	NA	NA	50
Sacramento-Roseville-Folsom, CA	1,889	-3.3 %	25.7 %	845
St. Louis, MO-IL	1,347	-0.7 %	19.5 %	293
San Antonio-New Braunfels, TX	1,246	-2.6 %	21.0 %	420
San Diego-Chula Vista-Carlsbad, CA	2,668	-6.6 %	11.1 %	2636
San Francisco-Oakland-Fremont, CA	2,747	-2.4 %	-6.0 %	1346
San Jose-Sunnyvale-Santa Clara, CA	3,442	0.9 %	6.6 %	474
Seattle-Tacoma-Bellevue, WA	1,999	-3.0 %	6.4 %	1376
Tampa-St. Petersburg-Clearwater, FL	1,741	-0.2 %	39.5 %	2652
Virginia Beach-Chesapeake-Norfolk, VA-NC	1,516	-2.2 %	19.9 %	38
Washington-Arlington-Alexandria, DC-VA-MD-WV	2,327	0.6 %	16.1 %	1708

Methodology
Rental data as of July 2025 for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on Realtor.com®. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the 50 largest metropolitan areas. Realtor.com began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019.

About Realtor.com^®
Realtor.com^® pioneered online real estate and has been at the forefront for over 25 years, connecting buyers, sellers, and renters with trusted insights, professional guidance and powerful tools to help them find their perfect home. Recognized as the No. 1 site trusted by real estate professionals, Realtor.com^® is a valued partner, delivering consumer connections and a robust suite of marketing tools to support business growth. Realtor.com^® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc.

Media contact: Mallory Micetich, press@realtor.com

View original content:https://www.prnewswire.com/news-releases/tariffs-and-rising-construction-costs-could-signal-trouble-ahead-for-rents---despite-two-years-price-declines-302526948.html

SOURCE Realtor.com

FAQ

What is the current median asking rent in the US according to Realtor.com (NWSA)?

As of July 2025, the median asking rent for 0-2 bedroom properties in the 50 largest metros is $1,712, representing a 2.5% decline year-over-year.

How much have multifamily housing completions declined in 2025?

Multifamily completions for buildings with two or more units fell 38.1% year-over-year in June 2025, dropping from 656,000 units to 406,000 units annually.

Which US region experienced the largest decline in multifamily completions?

The Midwest region saw the steepest decline at -55.7%, followed by the South (-33.5%), Northeast (-33.0%), and West (-28.9%).

How do current rent prices compare to pre-pandemic levels?

Despite recent declines, rent prices remain $254 (17.4%) higher than pre-pandemic levels, though they are now $47 (-2.7%) below the peak reached in August 2022.

What is causing the pullback in multifamily development according to Realtor.com?

The pullback is driven by elevated construction costs, shrinking profit margins due to lower rents, and newly expanded tariffs on imported building materials like steel and aluminum.