Real estate investors know that keeping a close watch on the rental market can help you craft a strong financial strategy for the year to come. The market and pricing trends for rental homes in 2025 has shown a complex landscape and the business landscape is changing fast. The national rental rate is dropping, but the impact on regional housing markets varies widely.
Whether the market is up or down depends on the region, with some cities full to bursting with renters while others are seeing increased vacancy rates and dropping prices.
All these signs are pointing to the importance of a stable rental home strategy where reliable tenants and a rock steady maintenance plan will help you hold the line until clearer trends emerge to guide your decisions.
The 2025 Rental Housing Market
There was a surge in rental rates that was great for investors, but the surge ended about two years ago. The year-over-year national rental rate growth has been negative since 2023, and that trend has continued through the first half of 2025. However, there are signs of a turn back toward positive growth headed into 2026.
Regional Rental Prices
Whether rental prices and vacancy rates are rising or falling has varied widely from region to region. Several metropolitan areas are seeing a drop in vacancy rate and a corresponding rise in rental prices while others are seeing the opposite. Hartford, CT leads the way with a rental price increase this year of 7.8%, followed closely by Cleveland, OH and Providence, RI at 6.3%, Chicago at 5.7%, and Milwaukee at 5.5%.
In contrast, Austin, TX leads the drop at -2.3% followed by Cape Coral, FL at -2% and Denver, CO at -1.1% rental rates this year.
Multifamily vs Single-Family Rental Rates
Single-family rental rates are rising faster than multi-family rental rates. In other words, rental houses are outpacing apartments in profitability. In the last year, single-family rental prices rose 4.3% while multifamily rates rose only 2.8%.
This trend is predicted to continue with a possible drastic shift toward lower apartment rates as the second half of 2025 heralds the largest completion and opening of new apartment units in over 50 years. 500,000 apartments are predicted to become available in markets across the country. While this will dilute the market from the perspective of investors, it will also help to alleviate the housing shortages felt keenly throughout the renter population.
Many of the new apartments will also cater to lower income families. This may potentially leave room for existing rental investors to target higher income tenants who are attracted to single-family homes.
Trends in Rental Demand
As the rental market becomes more competitive, it’s important to stay apprised of what today’s renters want most in a home, townhouse, or apartment. The leading trends in renter demand are energy efficiency, pet friendliness, and longer leases. While smart home features are buzz-word trendy, they are not swaying decisions as much as low power bills, pets, and the promise of stability.
Energy Efficiency
Second only to a reasonable rent rate is the desire for energy efficient homes. Energy efficiency has come to mean a combination of good insulation and sealing of the home, efficient HVAC, functional thermostat, and energy star rated home appliances. These factors combine to equal both greater comfort during extreme temperatures and year-round lower power bills. The advantage of eco-friendly sustainability is also a plus.
Pet Friendliness
With around one in five households adopting a pet during the COVID pandemic, allowing pets in your rental has become more and more common. These furry companions have become part of the family and leaving them behind is a no-go. Pet policies are one of the areas where many landlords are making concessions to attract high quality tenants who have one to four furry well-behaved pets.
It is fine to require a pet policy or modest pet rent but landlords with notably unfriendly pet policies will find themselves less competitive than more welcoming properties.
Longer Leases
Interestingly, tenants are also interested in longer leases. In a time of instability, a long lease provides greater stability to both investors and residents. With well-vetted tenants, this is a win-win scenario promising less risk of frequent turnover and greater financial security.
Foreseeable Challenges in the Next Year for Investors
Finally, let’s look at a potential challenges on the horizon: access to materials for home improvements.
Whether from global unrest or international tariffs that may add additional fees or cause vendors to relocate their warehouses, the supply chains that contractors rely on for essential supplies like lumber, steel, and prefabricated features may see some disruption in the coming year.
Sourcing locally and planning ahead are two sound strategies for ensuring that the properties in your portfolio get the upgrades they need. Now may also be a good time to reassess major renovations unless you can ensure the supplies will be ready in reserve by the time your project is scheduled to start.
Investment Rental Home Strategy from 2025 – 2026
It’s never too early to plan ahead, manage your portfolio, and prepare for upcoming market trends. Prisma Landlord can help with advanced property management software features that can help to manage the back-end of your business and streamlined tenant communications. Contact us today to learn more about how we can help you build a sound investment and portfolio strategy for 2025 – 2026 with intuitive software tools.
