The U.S. rental market continues to show signs of cooling, bringing cautious optimism for renters across the nation. Realtor.com’s latest May 2025 Rent Report highlights a 22-month streak of declining year-over-year rents, signaling that affordability though still a challenge is slowly improving. However, underlying economic, policy, and construction trends suggest that the relief may be temporary.
Rents Continue to Decline But Still Above Pre-Pandemic Levels
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The median asking rent across the 50 largest metro areas was $1,705 in May 2025.
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This represents a 1.7% year-over-year decline, the 22nd consecutive monthly decrease.
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Month-to-month, rents ticked up slightly by $5 compared to April.
By Unit Size:
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Studios: $1,418 (-1.9% YoY)
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1-Bedroom Units: $1,582 (-2.3% YoY)
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2-Bedroom Units: $1,896 (-1.7% YoY)
While renters may welcome these declines, rents remain 19.6% higher than in May 2019 and only 3.1% below the peak in August 2022. In other words, affordability has improved since the pandemic’s peak, but renters are still paying significantly more than they did five years ago.
Regional Disparities: Not All Markets Are Equal
The cooling trend is far from uniform. Regional factors including local economies, federal employment hubs, and even global trade policies are shaping rental trends in unique ways.
Inflation vs. Rent Growth
Since 2019, rent growth has generally lagged behind inflation. Some key examples:
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San Francisco: -3.2%
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Minneapolis: +3.9%
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Seattle: +7.9%
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Denver: +8.9%
This indicates that while rents have increased, in many cases the overall cost of living has risen faster than housing costs.
International Student Impact
Recent visa policy changes limiting international student enrollments are expected to lower rental demand in student-heavy hubs like Boston, San Jose, and Seattle. Although international students make up only 0.2%–2.1% of local renter populations, their influence in niche neighborhoods is significant.
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May declines: Miami (-2.7%), Seattle (-2.3%), Orlando (-1.1%), Boston (-0.4%).
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Slight growth: San Jose (+0.6%).
Federal Employment Markets
Cities with large federal employee populations are seeing mixed rental outcomes:
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Washington, D.C.: +1.3% (increase)
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San Diego: -5.9% (sharp drop)
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Virginia Beach: -2.5%
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Oklahoma City: -1%
This shows how federal workforce shifts and budget changes can directly influence local rental markets.
Construction Costs & Tariffs
Rising tariffs on steel and aluminum (now 50%) are expected to push construction costs higher. In the long term, this may constrain housing supply and drive rents up. For now, many impacted cities like Memphis (-3.3%), Milwaukee, and Cleveland are still experiencing declines.
Broader Housing Market Influences
The rental market cannot be viewed in isolation it’s tied to broader economic and housing trends.
Suburban Rental Growth
With homeownership becoming increasingly unaffordable, many households are turning to suburban rentals.
Between 2018 and 2023, renter households in counties surrounding cities like Austin, Nashville, and Denver grew by up to 50%.
This shift reflects:
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Rising home prices.
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A preference for more space post-pandemic.
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New multifamily developments catering to suburban renters.
Apartment Oversupply May Be Ending
The rental relief of the past two years has been partly due to an apartment construction boom. However, as that oversupply is absorbed, rents may rebound.
Forecasts suggest:
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+2.8% growth in single-family rentals.
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+1.6% growth in multifamily rentals.
If new construction slows under tariff pressures, affordability gains could reverse by 2026–2028.
Shelter Costs & Inflation
Despite market rent declines, government inflation measures still show elevated housing costs. This is due to how shelter costs are calculated in CPI, which tends to lag real-world market trends.
In April 2025, rental inflation remained one of the largest contributors to overall inflation, keeping pressure on household budgets.
What This Means for Renters
The current cooling trend offers a window of opportunity for renters:
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Negotiating Power: Renters may find more leverage when renewing leases or seeking concessions.
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Regional Opportunities: Cities like San Diego, Memphis, and Miami are seeing larger declines, which could benefit movers.
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Short-Term Relief: With inflation easing and rents declining, monthly housing budgets are under less strain than two years ago.
However, renters should remain cautious:
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Tariffs and rising construction costs may reduce supply.
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The end of the apartment glut could tighten competition again.
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Broader economic policies (like international student restrictions) may have ripple effects in certain metros.
Conclusion
The May 2025 Rent Report paints a picture of a market in transition. While renters are finally seeing relief after years of relentless increases, the future is uncertain. Structural factors from global trade tariffs to local housing supply will play a major role in determining whether affordability continues to improve or renters face another wave of rising costs.
For now, renters should take advantage of softening conditions, explore regional trends, and plan ahead because today’s cooling market may not last.
Source: MSN – “May Rent Report Highlights Cooling U.S. Rental Markets and Affordability Trends”