Homebuilders, who are set to kick off the spring selling season after the Philadelphia Eagles emerged victorious in the Super Bowl, may have difficulty winning over apartment renters.

According to early earnings reports from apartment real estate investment trusts, fewer renters are leaving their apartments. Instead, they are renewing where they are and paying higher rent. Despite the allure of concessions, renters aren't even moving to other apartments.

Houston-based Camden Realty Trust reported after the stock markets closed last Thursday that turnover dropped to 41% in last year’s final three months from 43% in the same period in 2023. For the year, turnover dropped to 49% from 51% in 2023.

On Monday, Chicago-based Equity Residential said its fourth-quarter turnover dropped to 9%. That brought full-year turnover to 42.5% in 2024, “which is the lowest we have reported in our 30-year history as a public company,” Michael Manelis, the REIT’s chief operating officer, told analysts on an earnings call.

Lower turnover deepens a trend that began in 2023 after mortgage rates rose, making for-sale housing even less affordable for many renters. This comes even as the supply of new apartment units hit record levels last year.

It's a double-edged sword for apartment owners and developers. Lower turnover means fewer expenses to prepare a unit for new tenants–a winner when combined with modest rent growth. But it has meant slower lease-up for new properties.

Dallas-based analytics and software firm RealPage reported a week ago that average lease-up for new properties has increased to 16 months versus 12 months.

Inversely, homebuilders hoping more renters opt for ownership this year may be out of luck. The lower turnover trend is not expected to reverse course this year.

This presents a direct challenge for homebuilders entering their most crucial selling season of the year. Spring Selling season — historically the period when homebuilders ramp up new order volumes — has already faced headwinds from persistently high mortgage rates and affordability gaps. With apartment retention rates rising, homebuilders now contend with an additional drag on demand: renters who, in previous years, may have considered making the leap into homeownership are now opting to stay put.

Manelis said move-outs to buy a home are at record lows, adding that a drop in mortgage rates likely would mean home values would rise, which would make it more difficult to buy a home.

So, we don't really see this being a light switch impact that's going to change,” he said.

Renters Pay More to Stay in Place

Renewing existing tenants peaked during the first quarter of 2022 as the COVID-19 pandemic was beginning to ebb. Freddie Mac reported renewal rates hitting 58.6%.

At the time, renewal rent prices weren’t rising at the same pace as new lease prices. Both were in double digits. Renewal rates rose on average 10.8% while new rates rose 18.8%.

Demand for apartments was strong, especially in Sunbelt cities, such as Miami and Orlando, because of domestic migration. By 2022, developers had the highest number of new units under construction since the mid-1980s. 

Renewal rates started to decline once the flurry of new supply began catching up with the demand. But in 2023, the renewal rates started to increase again in the face of new supply. Last year, nearly 600,000 apartment units were added, a record number, according to RealPage.

Through the year, RealPage showed that renewal of existing tenants averaged 54.5%, well ahead of the decade before COVID-19 and 2023’s 53%.

Renters simply have chosen not to move within the cities they live in despite apartment owners dangling more in concessions to entice them, particularly for new construction apartments.

There is still a sizeable migration to certain places, like the Sunbelt, from such places as New York City, but there doesn’t seem to be as much moving around within a given city as there used to be among people who had only recently moved there,” said Brad Case, chief economist for Northern Virginia-based Middleburg Communities.

Middleburg isn’t publicly traded but has acquired some 30,000 apartment units over the past 20 years across the Southeast and Mid-Atlantic and has another 4,000 units under development. Case said the firm has experienced a lower turnover, too.

Renters staying in place has allowed apartment owners to continue renewing renters at higher rates but at roughly half the levels at the 2022 peak. New lease rates reflect the abundance of new units.

Camden’s renewal prices increased a total of 3.3% across its 57,000 units in the fourth quarter compared to new lease rates dropping 4.7%. Equity Residential, which has more than 75,000 units, reported renewal rates in its established markets increasing by an average of 5.1% and new lease prices averaging 3.7% lower.

Why Renters Are Staying

The reason renters are staying put extends beyond the lack of affordable for-sale housing. Most who move out of an apartment usually move to a different apartment, not to buy a house.

Manelis credited Equity Residential’s “success in creating remarkable resident experiences” for its lower turnover.

In a LinkedIn post, Jay Parsons, head of investment strategy at Lubbock, Texas-based apartment investor Madera Residential, wrote that apartment firms have focused on retention through better service to tenants but also noted that renters may view savings to move as incremental and not worth the trouble.

I wonder how many got that notice and just signed it–which is easier and faster than ever with online renewals–without shopping around for better deals,” he wrote.

Those who did move out, increasingly moved into single-family rentals. Parsons cited a John Burns Research and Consulting survey that found 61% of new single-family renters came from apartments last year compared to 48% in 2023.

People who wanted four walls used to be in a hurry to buy because that was, practically speaking, the only way they could get four walls," Case said. "But now that they can get four walls by renting, and many of them like that idea.”

This shift forces homebuilders to rethink their approach. As competition for buyers intensifies, builders must sharpen their incentives, financing programs, and customer engagement strategies to counter the growing appeal of high-quality rental options. More critically, with mortgage rates still elevated, builders must address a narrowing pool of would-be buyers — many of whom may now see single-family rentals as a more flexible, less burdensome alternative to homeownership.

Camden Realty Trust has two single-family home developments that are being leased out. On Friday's earnings call, Ric Campo, the company's CEO, told analysts that they warned that the developments would be leased out slowly.

It's the particular demographic that looks for that product type, has a tendency to show up once, then they show up again, then they show up, and they measure a bedroom and make sure that their furniture can fit," Campos said. "Now the good news is that we think they're going to be really sticky. If it takes them that long to make a decision to move in, we think it'll take them equally as long to make a decision to move out."