New apartments are taking longer to rent than they did a few years ago.
A new report from Redfin found that less than half of newly built apartments completed in the third quarter of 2024 were rented within three months. That ties with the fourth quarter of 2023 for the lowest share on record aside from the start of the pandemic, said the real estate firm, which analyzed U.S. Census Bureau seasonally adjusted absorption rate data.
The firm attributed the trend to the growing number of options renters have to choose from as 142,900 new apartments were completed in the third quarter, the highest number on record.
“Some landlords are slashing prices and offering concessions like free parking to woo tenants, but renters should know that these perks could start to dry up,” said Redfin senior economist Sheharyar Bokhari. “Builders are slowing their roll, with permits to construct apartments down almost 10% year over year. This means renters will eventually have fewer apartments to choose from, which could embolden landlords to boost rents – though that may not happen until well into next year because a lot of apartments built during the pandemic are still coming on the market."
During the pandemic, apartments were renting quickly due to soaring demand, and as a result, rents increased. Builders ramped up construction, leading to more vacancies and lower rents, Redfin explained. At the end of 2024, rental vacancy for buildings with five or more units stood at 8.2%, the highest level since the beginning of 2021. Median rent is now $100 below its record high and increased just 0.4% year-over-year to $1,607 in February. This is a far cry from the double-digit rent growth the market experienced during the pandemic, said Redfin.
Absorption was similar among all bedroom types during the quarter at around 50%. Studio apartments have been renting more quickly, with half of the studio units completed during the third quarter coming off the market within three months. That's up 42% from a year ago, said the report.
Meanwhile, absorption fell to 49% from 54% for one-bedroom apartments, to 50% from 51% for two-bedroom apartments. Meanwhile, the category increased 51% from 56% for three-plus-bedroom apartments.
Redfin said the market for studio apartments may be holding up relatively well due to limited supply. Completions of studios only rose 0.4% during the quarter while all other bedroom types posted double-digit growth.