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US Apartment Market Cools in Q3: How Are Residential REITs Placed?
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Key Takeaways
U.S. apartment rents fell 0.3% in Q3 2025, marking the first July-September decline since 2009.
High supply and slower job growth pushed occupancy down to 95.4%, ending five quarters of gains.
AvalonBay, Equity Residential, Essex and UDR are still expected to see modest revenue and FFO growth in Q3.
After two years of robust growth, the U.S. apartment market has finally hit a pause, with rent growth slipping into negative territory in the third quarter of 2025. According to RealPage data, effective asking rents fell 0.3% between July and September, the first rent cut between July and September since 2009. In the year-ending third quarter, rents slipped 0.1%. The slowdown reflects a cooling economy.
This brings our focus on residential REITs like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) , Essex Property Trust, Inc. (ESS - Free Report) and UDR, Inc. (UDR - Free Report) and makes us wonder about their performance in the third quarter. However, prior to that, we need to delve deeper into data from RealPage and check these landlords’ chances of growth despite broader macro uncertainty.
Demand Slows, Supply Catches Up
About 637,000 market-rate apartments were absorbed in the year-ending third quarter of 2025. While still healthy by long-term standards, it is a clear step down from the record nearly 784,900 units absorbed in the year-ending second quarter of 2025. “Sluggish new lease activity” is the culprit, said RealPage Chief Economist Carl Whitaker, pointing to weaker job growth and more cautious consumer behavior as key factors behind the shift amid an uncertain economic backdrop.
While demand cooled, construction of roughly 474,800 units was completed nationwide over the past year, including 105,500 in the third quarter alone. That’s below last year’s peak but still well above normal supply levels. With so many new units hitting the market, landlords have had to compete harder to fill vacancies. Occupancy slipped to 95.4% in the quarter, down 30 basis points and ending five consecutive quarters of gains.
To attract renters, concessions became more common, with 22% of properties offering discounts averaging 6.2%. Operators are increasingly prioritizing occupancy over pricing power, suggesting rent softness may persist until concessions taper off. Interestingly, resident retention rose year over year, as renters chose to stay put amid economic uncertainty.
Regional Winners and Losers
The rent cuts haven’t hit every region equally. Markets that built aggressively during the boom, especially across the South and West, are seeing the steepest declines. Rents dropped nearly 8% in Denver and Austin and around 5% in Phoenix and San Antonio. Meanwhile, tourism-driven cities such as Las Vegas, Orlando, Nashville and San Diego are softening too, as travelers spend less and local economies cool.
In contrast, markets with lighter construction pipelines, such as the Midwest and Northeast, have held up better. Tech-heavy coastal hubs like San Francisco, New York and San Jose even saw modest rent growth, likely helped by return-to-office policies and limited new deliveries.
A Cooling Market but Not a Crisis
Despite the slowdown, the broader picture isn’t alarming. Demand is still running above the decade average, and most tenants are staying put. Retention rates are even rising as people avoid moving during uncertain times. What’s happening now looks more like a normalization after an extraordinary run than a downturn.
How Are Residential REITs Placed Ahead of Q3 Earnings?
AvalonBay Communities: AVB has established itself as a leading player in the residential REIT sector, with a strong portfolio of high-quality apartment communities. The company's geographic diversification, focus on both suburban and urban properties and disciplined capital allocation have positioned it favorably.
In an operating update, AvalonBay Communities provided a constructive update, noting that same-store residential revenue growth for July and August 2025 was in line with expectations set when it published its current outlook.
AvalonBay is set to announce its third-quarter 2025 earnings on Oct. 29, after market close. The Zacks Consensus Estimate of $772.14 million for third-quarter revenues suggests a 5.15% year-over-year increase. The Zacks Consensus Estimate for the quarterly core FFO per share of $2.81 implies year-over-year growth of 2.55%.
Equity Residential: EQR boasts a portfolio of high-quality apartment units in some of the key markets of the United States with an affluent tenant base. It has an established presence in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California, and an expanding presence in Denver, Atlanta, Dallas/Ft. Worth and Austin. The company benefits from limited resident turnover. The high cost of home ownership in its markets and the company’s diversification efforts into suburban markets to capture rising demand are encouraging. A focus on technology to drive margin expansion augurs well.
In September, Equity Residential reaffirmed that its operations remain within guidance. The REIT reported that its same-store revenue growth is on track, and it continues to expect to generate same-store revenue growth of 2.6% to 3.2% and physical occupancy of 96.4% for full-year 2025. Additionally, EQR reaffirmed its blended rate growth forecast of 2.2% to 2.8% for the third quarter. The company noted about wrapping up its peak leasing season with sustained high occupancy levels and solid resident retention.
Equity Residential is scheduled to release its third-quarter 2025 earnings on Oct. 28, after market close. Currently, the Zacks Consensus Estimate for EQR’s quarterly revenues stands at $781.41 million, indicating a 4.42% increase year over year. The Zacks Consensus Estimate for the quarterly normalized FFO per share of $1.02 suggests year-over-year growth of 4.08%.
Essex Property Trust: This residential REIT’s substantial exposure to the West Coast market has offered ample scope to enhance its top line. The West Coast is home to several innovation and technology companies that drive job creation and income growth. This region has higher median household incomes, an increased percentage of renters than owners and favorable demographics. Also, due to the high cost of homeownership, the transition from renter to homeowner is difficult, making renting apartment units a more flexible and viable option.
In its September investor presentation, Essex reported that its superior same-property revenue and core FFO per share growth compared with peers has been largely fueled by continued strength in Northern California. The company also reaffirmed that same-property revenue growth remains in line with full-year expectations, which call for sub-3% growth in the third quarter and an uptick to above 3% in the fourth quarter.
Essex Property Trust is set to announce its third-quarter 2025 earnings results on Oct. 29, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $475.51 million. This suggests a 5.51% year-over-year rise. The Zacks Consensus Estimate for the quarterly core FFO per share of $3.97 also calls for year-over-year growth of 1.53%.
UDR: This residential REIT stands in a strong position to capitalize on its well-diversified portfolio, which includes a balanced mix of high-quality Class A and B properties across coastal and Sunbelt markets. Steady rental housing demand in these regions, supported by favorable demographic shifts, should work to its advantage. Additionally, the company’s use of technology to streamline operations and boost margins strengthens its long-term growth outlook.
UDR’s September investor presentation highlighted that key operating metrics, across revenue and expense growth, were tracking as expected relative to the midpoints of its improved full-year outlook.
UDR is set to announce its third-quarter 2025 earnings results on Oct. 29, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $430.13 million. This indicates a 2.37% year-over-year rise. The consensus mark for FFO as adjusted per share of 63 cents calls for a 1.61% change year over year.
Here’s how AVB, EQR, ESS and UDR have performed over the past six months.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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US Apartment Market Cools in Q3: How Are Residential REITs Placed?
Key Takeaways
After two years of robust growth, the U.S. apartment market has finally hit a pause, with rent growth slipping into negative territory in the third quarter of 2025. According to RealPage data, effective asking rents fell 0.3% between July and September, the first rent cut between July and September since 2009. In the year-ending third quarter, rents slipped 0.1%. The slowdown reflects a cooling economy.
This brings our focus on residential REITs like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) , Essex Property Trust, Inc. (ESS - Free Report) and UDR, Inc. (UDR - Free Report) and makes us wonder about their performance in the third quarter. However, prior to that, we need to delve deeper into data from RealPage and check these landlords’ chances of growth despite broader macro uncertainty.
Demand Slows, Supply Catches Up
About 637,000 market-rate apartments were absorbed in the year-ending third quarter of 2025. While still healthy by long-term standards, it is a clear step down from the record nearly 784,900 units absorbed in the year-ending second quarter of 2025. “Sluggish new lease activity” is the culprit, said RealPage Chief Economist Carl Whitaker, pointing to weaker job growth and more cautious consumer behavior as key factors behind the shift amid an uncertain economic backdrop.
While demand cooled, construction of roughly 474,800 units was completed nationwide over the past year, including 105,500 in the third quarter alone. That’s below last year’s peak but still well above normal supply levels. With so many new units hitting the market, landlords have had to compete harder to fill vacancies. Occupancy slipped to 95.4% in the quarter, down 30 basis points and ending five consecutive quarters of gains.
To attract renters, concessions became more common, with 22% of properties offering discounts averaging 6.2%. Operators are increasingly prioritizing occupancy over pricing power, suggesting rent softness may persist until concessions taper off. Interestingly, resident retention rose year over year, as renters chose to stay put amid economic uncertainty.
Regional Winners and Losers
The rent cuts haven’t hit every region equally. Markets that built aggressively during the boom, especially across the South and West, are seeing the steepest declines. Rents dropped nearly 8% in Denver and Austin and around 5% in Phoenix and San Antonio. Meanwhile, tourism-driven cities such as Las Vegas, Orlando, Nashville and San Diego are softening too, as travelers spend less and local economies cool.
In contrast, markets with lighter construction pipelines, such as the Midwest and Northeast, have held up better. Tech-heavy coastal hubs like San Francisco, New York and San Jose even saw modest rent growth, likely helped by return-to-office policies and limited new deliveries.
A Cooling Market but Not a Crisis
Despite the slowdown, the broader picture isn’t alarming. Demand is still running above the decade average, and most tenants are staying put. Retention rates are even rising as people avoid moving during uncertain times. What’s happening now looks more like a normalization after an extraordinary run than a downturn.
How Are Residential REITs Placed Ahead of Q3 Earnings?
AvalonBay Communities: AVB has established itself as a leading player in the residential REIT sector, with a strong portfolio of high-quality apartment communities. The company's geographic diversification, focus on both suburban and urban properties and disciplined capital allocation have positioned it favorably.
In an operating update, AvalonBay Communities provided a constructive update, noting that same-store residential revenue growth for July and August 2025 was in line with expectations set when it published its current outlook.
AvalonBay is set to announce its third-quarter 2025 earnings on Oct. 29, after market close. The Zacks Consensus Estimate of $772.14 million for third-quarter revenues suggests a 5.15% year-over-year increase. The Zacks Consensus Estimate for the quarterly core FFO per share of $2.81 implies year-over-year growth of 2.55%.
Equity Residential: EQR boasts a portfolio of high-quality apartment units in some of the key markets of the United States with an affluent tenant base. It has an established presence in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California, and an expanding presence in Denver, Atlanta, Dallas/Ft. Worth and Austin. The company benefits from limited resident turnover. The high cost of home ownership in its markets and the company’s diversification efforts into suburban markets to capture rising demand are encouraging. A focus on technology to drive margin expansion augurs well.
In September, Equity Residential reaffirmed that its operations remain within guidance. The REIT reported that its same-store revenue growth is on track, and it continues to expect to generate same-store revenue growth of 2.6% to 3.2% and physical occupancy of 96.4% for full-year 2025. Additionally, EQR reaffirmed its blended rate growth forecast of 2.2% to 2.8% for the third quarter. The company noted about wrapping up its peak leasing season with sustained high occupancy levels and solid resident retention.
Equity Residential is scheduled to release its third-quarter 2025 earnings on Oct. 28, after market close. Currently, the Zacks Consensus Estimate for EQR’s quarterly revenues stands at $781.41 million, indicating a 4.42% increase year over year. The Zacks Consensus Estimate for the quarterly normalized FFO per share of $1.02 suggests year-over-year growth of 4.08%.
Essex Property Trust: This residential REIT’s substantial exposure to the West Coast market has offered ample scope to enhance its top line. The West Coast is home to several innovation and technology companies that drive job creation and income growth. This region has higher median household incomes, an increased percentage of renters than owners and favorable demographics. Also, due to the high cost of homeownership, the transition from renter to homeowner is difficult, making renting apartment units a more flexible and viable option.
In its September investor presentation, Essex reported that its superior same-property revenue and core FFO per share growth compared with peers has been largely fueled by continued strength in Northern California. The company also reaffirmed that same-property revenue growth remains in line with full-year expectations, which call for sub-3% growth in the third quarter and an uptick to above 3% in the fourth quarter.
Essex Property Trust is set to announce its third-quarter 2025 earnings results on Oct. 29, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $475.51 million. This suggests a 5.51% year-over-year rise. The Zacks Consensus Estimate for the quarterly core FFO per share of $3.97 also calls for year-over-year growth of 1.53%.
UDR: This residential REIT stands in a strong position to capitalize on its well-diversified portfolio, which includes a balanced mix of high-quality Class A and B properties across coastal and Sunbelt markets. Steady rental housing demand in these regions, supported by favorable demographic shifts, should work to its advantage. Additionally, the company’s use of technology to streamline operations and boost margins strengthens its long-term growth outlook.
UDR’s September investor presentation highlighted that key operating metrics, across revenue and expense growth, were tracking as expected relative to the midpoints of its improved full-year outlook.
UDR is set to announce its third-quarter 2025 earnings results on Oct. 29, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $430.13 million. This indicates a 2.37% year-over-year rise. The consensus mark for FFO as adjusted per share of 63 cents calls for a 1.61% change year over year.
Here’s how AVB, EQR, ESS and UDR have performed over the past six months.
Price Performance
Image Source: Zacks Investment Research
Currently, AvalonBay, Equity Residential, Essex Property Trust and UDR carry a Zacks Rank of 3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.