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  • Writer's pictureRealFacts Editorial Team

Multifamily Absorption Reaches Record High in Q2


multifamily housing

In a landscape marked by challenges, the multifamily sector has found a bright spot with a remarkable surge in apartment demand. According to a recent report from RealPage Market Analytics, the absorption of multifamily units has reached one of its highest points in 24 years. The past six months have been particularly striking, highlighting an impressive demand that may be difficult to overstate.


Record-Setting Demand


The year ending in the second quarter of 2024 saw an astounding 390,000 units leased on net, marking the eighth-highest annual number since the year 2000. In the first and second quarters of 2024 alone, 257,000 units were absorbed. This figure is nearly in line with the pandemic-era demand surge in the first half of 2021, which saw about 270,000 units absorbed. 


"The impressive demand reading in the year-ending 2nd quarter 2024 may be difficult to overstate," the RealPage report noted, emphasizing the extraordinary nature of the current market dynamics.


Supply Surge and Rent Growth


Despite the notable spike in demand, the supply side has dominated media headlines. An unprecedented supply surge, with more than 500,000 new market-rate apartments delivered in the past year – a 45% increase from the previous year – has kept rent growth modest. This figure represents the largest number of new deliveries since 1986, with an expectation of an additional 629,000 units in the coming year.


This rampant oversupply has tempered rent growth, with national occupancy and rent growth rates stabilizing. Occupancy held steady at 94.2% in June, consistent over the past three months, though down 0.4% year-over-year. Rent growth also remained modest, with a 0.2% increase in the year ending June 2024. The report suggests that rent is unlikely to rise significantly in the remainder of the year.


Regional Variations


The South emerged as a standout region, absorbing 226,000 units on net over the past year, accounting for 60% of the national total. The West also showed strong performance, with 89,000 units absorbed, its best annual showing in two years.


In the Northeast, occupancy stood at 95.8%, with 30,500 units leased. The Midwest saw 44,100 units leased, with a 94.8% occupancy rate. These regions experienced modest supply pressure, resulting in larger annual rent growth. The lower the annual inventory, the more likely a market is to post solid rent growth.


Rent Growth and Decline


Nationally, rents grew by 0.2% in June. However, the Midwest and Northeast saw more substantial increases, with rents rising 2.6% and 2.4% respectively. In contrast, the South experienced a 1.4% decline, while the West saw no change.


Several major markets posted annual effective rent growth of 2.5% or more in June. Kansas City led the nation with a 3.8% increase, followed by Washington, DC, Cleveland, Cincinnati, Milwaukee, Greensboro, Virginia Beach, Newark, Columbus, and Chicago.


Conversely, Austin suffered the worst rent slump, with a 7.7% decrease in June. Other markets experiencing significant declines included Jacksonville (down 4.9%), Atlanta (down 4.8%), and Raleigh/Durham (down 4.4%). Additional markets with declines of 3% or more were San Antonio, Phoenix, Charlotte, Orlando, Dallas, and Salt Lake City.


Market Implications


The stabilization of rental rates against the backdrop of a significant supply wave suggests an incredible demand capacity in the current market. The RealPage report underscores the potential for further adjustments in the balance between supply and demand, particularly as more units come online.


For investors, these trends highlight the importance of understanding regional dynamics and the impact of supply surges on rent growth. While high absorption rates indicate strong demand, the influx of new units may continue to exert pressure on rental prices, necessitating strategic approaches to market positioning and tenant retention.

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