Residential Real Estate News
New Apartments in U.S. Are Leasing at Slowest Pace on Record
New data from Redfin reveals that less than half (47%) of newly built apartments completed in Q3 2024 were rented within three months. This matches Q4 2023 for the lowest absorption rate on record, aside from the early pandemic period.
Redfin's analysis is based on the U.S. Census Bureau's seasonally adjusted absorption rate data for unfurnished, unsubsidized, privately financed rental apartments in buildings with five or more units, dating back to 2012. The latest available data tracks apartments completed in Q3 2024 and whether they were rented within three months.
The slow leasing pace is due to the sheer volume of options available--142,900 new apartments were completed in Q3, the highest number on record.
"Some landlords are cutting prices and offering perks like free parking to attract tenants, but renters should be aware that these incentives might not last," said Redfin Senior Economist Sheharyar Bokhari. "Developers are pulling back, with apartment construction permits down nearly 10% year over year. As a result, renters will eventually have fewer choices, which could push landlords to raise rents--though that may not happen until next year, as many apartments built during the pandemic are still hitting the market."
During the pandemic, surging demand led to record-fast apartment absorption and soaring rents. In response, developers ramped up construction, which has since contributed to higher vacancy rates and lower rents. By the end of 2024, the rental vacancy rate for buildings with five or more units had climbed to 8.2%, the highest since early 2021. The median U.S. asking rent now stands at $1,607--up 0.4% year over year but about $100 below its peak. While rent declines have slowed compared to 2023, current rent growth is far from the double-digit increases seen during the pandemic.
Absorption rates for apartments completed in Q3 were relatively uniform across unit types, hovering around 50%. However, studio apartments bucked the trend, with 50% rented within three months--up from 42% a year earlier. In contrast, absorption rates fell for other unit types:
- 1-bedroom apartments: 49%, down from 54%
- 2-bedroom apartments: 50%, down from 51%
- 3+-bedroom apartments: 51%, down from 56%
The resilience of the studio apartment market may stem from limited supply--while completions of all other unit types saw double-digit increases in Q3, studio completions edged up by just 0.4%.
