Rental housing economist Jay Parsons is a frequent industry speaker and often weighs in on the latest multifamily and single-family rental data on LinkedIn and X. Formerly the chief economist at RealPage, he serves as a part-time economic advisor for JPI and is a partner in WayMaker, a multifamily investment group.
Multifamily Executive caught up with Parsons to discuss the latest industry fundamentals, what he’s watching for the second half of the year, and what makes him optimistic.
At the midpoint of 2025, how would you characterize the overall health of the multifamily market?
I’d say it’s steadily moving down the path we all thought it’d go down, albeit with a few more twists and turns than anticipated.
The good news for apartment operators is that peak supply is in the rearview mirror, macro demand is strong, retention rates are high, rent-to-income ratios are back to pre-pandemic levels, and the vast majority of renters are paying rent every month.
The bad news is that macroeconomic uncertainty continues to cast a darkish cloud over the short-term outlook. And one sobering reality is that while peak completions are in the rearview mirror, peak lease-up competition is not. We’re still right in the middle of it, and it’ll take time to work through filling up the biggest supply wave in 40-plus years, so lease-up competition continues to put downward pressure on rents in most markets.
But demand is so strong that it’s supporting the thesis that rents could rebound once all these lease-ups stabilize.
What surprised you most about the first half of the year?
For me, the biggest surprise might have been the disappointment and nervousness among apartment operators in the second quarter. And to me, a lot of it stemmed from unrealistic expectations for an occupancy rebound allowing for concession burn-off and rent bumps. I think a lot of folks saw charts showing peak completions behind us and therefore assumed green lights in the spring/summer leasing season. But we’re still right in the middle of peak lease-up activity. Units don’t lease up receiving a certificate of occupancy, obviously. Everyone is understandably anxious to get past this two-year slowdown driven by the highest supply wave in 40-plus years, but it’ll take time. And there’ll be some bumpiness on the road to recovery, with sometimes two steps forward followed by one step back.
What are you seeing in terms of rent growth across markets? Are any regions/markets outperforming or underperforming expectations?
The Midwest, Northeast, and Mid-Atlantic all continue to dominate the rent growth leaderboard, and I think most of those markets have seen rent growth stabilize at pretty sustainable numbers. We’re seeing real improvement on the West Coast, especially in Silicon Valley, which has been hit hard over the last five years but now seeing strong momentum as more tech firms bring workers back into the office. The Sun Belt and Mountain regions remain the laggards for now as they have the biggest supply waves to work through. But even in that region, we’re seeing a widening range of performance. For example, in Texas, we’re seeing Dallas and Houston hold up better than Austin.
After the historic number of deliveries, what happens next for the multifamily industry?
If the economy holds up, and that’s obviously a big “if,” then there’s little obvious reason to doubt the mainstream thesis at this point—with occupancy rates stabilizing, concessions evaporating, and rent growth rebounding. Not to peak inflation levels, but maybe moderately above the long-term average. That’s a positive environment for operators all over the country, but especially in growth markets with strong demand.
What are you closely monitoring for the second half of the year that could impact multifamily?
The obvious ones are the macroeconomic economy, including jobs and interest rates. Beyond that, I’m curious to watch apartment sales activity. It’s such an odd time where seemingly everyone wants to be a buyer, “but not yet” or “but not at these cap rates” or “but not until interest rates come down more” or “but not those types of deals,” or “but we’re waiting on LP equity to come around,” etc. With so much uniform bullishness on the long-term outlook and so much dry powder targeting multifamily, what gets the market going again? If rent growth rebounds to semi-normal levels and interest rates come down only slightly, is that enough?
How might federal or state-level housing policy impact multifamily performance or development?
We’ll see a patchwork of pro-development policies spur certain types of development, and that’ll likely boost starts in an environment that will likely remain tough for getting new starts going. In other words: I think a big share of starts will have some tie back to federal and state policy.
For example, Congress permanently renewed the Opportunity Zone program, which improves the development math for projects in those zones (once a new round of zones is finalized).
The Department of Housing and Urban Development is also pushing through procedural improvements to speed up approvals of new affordable housing projects, which could also move the needle.
We could also see new state laws have an impact in certain states. For example, California just significantly watered down NIMBYs’ ability to abuse environmental protections to stall or block new housing. Red tape and litigation add a lot of cost and uncertainty to construction projects, so this could move the needle. And in Texas, there’s a new law making it much easier/faster for multifamily developers to build on land zoned for commercial use in large cities.
What makes you optimistic about the market?
At the end of the day, the multifamily market is not that complicated. It’s all about supply and demand. The demand drivers have been favorable in most U.S. markets throughout the rent slowdown of these past two years. We’ve had issues, but a lack of demand was never one of them. The issue was that strong demand was topped by even stronger supply, and that put downward pressure on rents. It’s just basic Econ 101.
Those demand drivers aren’t likely to just disappear as supply dramatically thins out.
