MARKET SNAPSHOT
$1,716 3Q 2024
94.0% 3Q 2024
168,682 [YTD: 458,251]
1.0% 3Q 2024
0 BASIS POINTS
178,942 [YTD: 533,425]
Notably, the absorption of 169,000 units on a net basis this quarter surpassed that of the second quarter, which is typically the period of each year that records the highest absorption.
Current projections for new unit deliveries indicate a significant 55% decline materializing next year.
Effective rent growth held steady at 1.0% in the third quarter, maintaining a similar pace over the past year.
The U.S. multifamily market continued its upward momentum in demand through Q3 2024, with over 168,000 units absorbed, bringing the year-to-date total to 458,000—the highest since 2021. This demand was bolstered by steady economic growth and the high barrier to entry to homeownership, leading to fewer vacant units overall. However, new deliveries remained high, with nearly 179,000 units completed in the third quarter, marking the eleventh consecutive quarter where supply exceeded demand. Despite this trend, the gap between supply and demand narrowed significantly in this quarter, stabilizing the occupancy rate at 94.0%. With supply levels beginning to ease and demand remaining strong, the significant supply-demand imbalances of the last two years are showing signs of ending.
During the third quarter, the U.S. added 179,000 new multifamily units, marking the eleventh consecutive quarter in which supply has exceeded demand—contributing to one of the most substantial apartment supply expansions in the nation’s history. Yet, a shift appears imminent for owners and operators in markets impacted by rapid supply growth. The Federal Reserve’s restrictive monetary policy over the past two years has curtailed new development, reducing the construction pipeline from a peak of 1.17 million units in Q1 2023 to 724,000 units by the end of September 2024. This contraction is projected to slow deliveries through 2025, with estimates indicating a drop to 335,000 units, fostering more balanced demand-supply conditions. In many overbuilt Sun Belt markets, this pullback in new construction is anticipated to aid in absorbing excess inventory, stabilize occupancy rates, and support meaningful rent growth in the regions where inventory has expanded the fastest.
Absorption of multifamily units surged to 169,000 in the third quarter, marking the highest absorption rate since Q3 2021. Notably, demand in this quarter surpassed that of the second quarter, typically the peak absorption period each year. Despite this strong demand, a supply-demand imbalance remained in the third quarter; however, the gap has significantly narrowed, allowing the average stabilized occupancy rate to remain unchanged from the prior year.
Occupancy declines have been most pronounced in the luxury segment over the past ten quarters, where properties face heightened competition due to a substantial influx of new units over the past three years. This has led to a steep 450-basis-point decline in luxury occupancy rates since 2021, bringing the segment just below 90% by the end of the current quarter. Mid-tier assets have also experienced occupancy pressures, though to a lesser degree. In these properties, some renters are opting for more affordable options in response to rent increases, while others take advantage of generous concessions offered by new luxury developments. Nonetheless, mid-tier properties maintain a solid average occupancy rate of 93.9% in the third quarter.
Rent growth appears to have stabilized and could be primed for a notable increase in the near to mid-term. Effective rent growth held steady at 1.0% in the third quarter, maintaining a similar pace over the past year. With occupancy rates leveling off, conditions seem favorable for a stronger rent growth trajectory heading into 2025. Consistent with recent trends, the Northeast and Midwest led in rent growth, with Cleveland, OH; Richmond, VA; San Jose, CA; Washington, D.C.; and Detroit, MI making up the top five among the nation’s 50 largest apartment markets, averaging an annual rental growth rate of approximately 3.6%.
In contrast, former high-growth markets like Austin and Raleigh have faced the sharpest declines, with year-over-year rent growth falling by -5.4%, and -3.2%, respectively, a stark shift from the double-digit growth rates recorded in late 2021. Nationwide, rent growth is projected to remain at 1.0% over the next two quarters. However, by the 2025 spring leasing season, rent growth is anticipated to accelerate, driven by steady demand and a reduced pace of new project deliveries, positioning the effective rent growth rate around 3.0% by the end of 2025.
| Rank | Market | Market Effective Rent Growth 12 Mo | Stabilized Vacancy | Annual Occupancy Change |
|---|---|---|---|---|
| 1 | Cleveland, OH | 3.6% | 92.4% | -0.6% |
| 2 | Richmond, VA | 3.6% | 93.8% | 0.7% |
| 3 | San Jose, CA | 3.6% | 96.0% | 0.6% |
| 4 | Washington, DC | 3.6% | 94.6% | 0.2% |
| 5 | Detroit, MI | 3.4% | 93.3% | 0.5% |
| 6 | Louisville, KY | 3.4% | 94.5% | 0.2% |
| 7 | Kansas City, MO | 3.3% | 93.5% | 0.1% |
| 8 | Boston, MA | 3.0% | 96.2% | 0.2% |
| 9 | Baltimore, MD | 2.9% | 94.0% | 0.2% |
| 10 | Columbus, OH | 2.8% | 93.6% | -0.2% |
| 11 | Cincinnati, OH | 2.8% | 94.6% | -0.2% |
| 12 | Northern New Jersey, NJ | 2.7% | 96.3% | -0.3% |
| 13 | Pittsburgh, PA | 2.5% | 94.9% | 0.1% |
| 14 | Milwaukee, WI | 2.5% | 96.5% | -0.1% |
| 15 | Chicago, IL | 2.5% | 95.4% | 0.3% |
| 16 | Norfolk, VA | 2.4% | 94.7% | 0.5% |
| 17 | Indianapolis, IN | 2.3% | 92.7% | 0.4% |
| 18 | San Francisco, CA | 2.2% | 94.3% | 0.5% |
| 19 | Oklahoma City, OK | 2.2% | 90.1% | 0.1% |
| 20 | Miami, FL | 2.2% | 96.2% | 0.2% |
| 21 | New York, NY | 2.1% | 97.8% | -0.1% |
| 22 | Seattle, WA | 1.9% | 94.7% | 0.4% |
| 23 | Sacramento, CA | 1.8% | 94.8% | 0.5% |
| 24 | Saint Louis, MO | 1.6% | 91.6% | -0.1% |
| 25 | Portland, OR | 1.6% | 94.5% | 0.4% |
| 26 | Philadelphia, PA | 1.6% | 94.7% | -0.3% |
| 27 | Minneapolis, MN | 1.3% | 94.6% | 0.2% |
| 28 | Inland Empire, CA | 1.2% | 95.0% | 0.3% |
| 29 | Orange County, CA | 1.1% | 96.4% | -0.3% |
| 30 | Los Angeles, CA | 0.7% | 95.3% | -0.2% |
| 31 | Houston, TX | 0.7% | 90.8% | -0.3% |
| 32 | Las Vegas, NV | 0.5% | 91.9% | 0.6% |
| 33 | Memphis, TN | 0.2% | 87.1% | -0.3% |
| 34 | Fort Lauderdale, FL | 0.1% | 94.3% | -0.4% |
| 35 | San Diego, CA | 0.0% | 95.5% | -0.7% |
| 36 | East Bay, CA | -0.1% | 94.3% | 0.3% |
| 37 | Nashville, TN | -0.8% | 92.8% | 0.1% |
| 38 | Denver, CO | -1.1% | 93.3% | -0.6% |
| 39 | Tucson, AZ | -1.1% | 90.4% | -1.8% |
| 40 | Salt Lake City, UT | -1.4% | 92.8% | -0.5% |
| 41 | Charlotte, NC | -1.4% | 91.6% | -0.8% |
| 42 | Dallas-Fort Worth, TX | -1.5% | 91.7% | -0.6% |
| 43 | Orlando, FL | -1.5% | 93.4% | 0.3% |
| 44 | Tampa, FL | -1.9% | 92.9% | -0.6% |
| 45 | San Antonio, TX | -2.0% | 90.0% | -0.4% |
| 46 | Atlanta, GA | -2.1% | 90.5% | -0.2% |
| 47 | Jacksonville, FL | -2.3% | 90.4% | -0.7% |
| 48 | Phoenix, AZ | -2.5% | 92.2% | 0.3% |
| 49 | Raleigh, NC | -3.2% | 92.4% | -0.6% |
| 50 | Austin, TX | -5.4% | 91.0% | -0.7% |
The third quarter concluded on a high note, with September’s non-farm payrolls surpassing expectations, adding 254,000 jobs. Upward revisions to the previous two months further boosted the quarterly figures, countering recent declines in hiring momentum. With these adjustments, job growth averaged 186,000 per month in Q3—down from the 267,000 average in Q1 but an improvement over Q2’s 147,000. Leading sectors such as Leisure and Hospitality, Healthcare, and Government continued their strong performance, contributing 71% of September’s job gains despite representing only about 40% of overall employment. This rebound in job growth underscores the view that demand for new workers has slowed but remains steady, reflecting a deceleration rather than a deterioration in hiring demand.
SEPTEMBER M-o-M JOBS CREATED
SEPTEMBER 2024 M-o-M EMPLOYMENT GROWTH
SEPTEMBER 2024
UNEMPLOYMENT RATE
Nominal Change
from August 2024
to September 2024: 72,000
Percent Change: 0.3%
Nominal Change
from August 2024
to September 2024: 48,000
Percent Change: 0.2%
Nominal Change
from August 2024
to September 2024: 62,000
Percent Change: 0.4%
Nominal Change
from August 2024
to September 2024: 19,000
Percent Change: 0.2%
Nominal Change
from August 2024
to September 2024: 20,000
Percent Change: 0.1%
| Sector | Nominal Change from August 2024 to September 2024 | Percent Change |
|---|---|---|
| Education and Health Services | 72,000 | 0.3% |
| Government | 48,000 | 0.2% |
| Leisure and Hospitality | 62,000 | 0.4% |
| Mining, Logging, and Construction | 19,000 | 0.2% |
| Trade, Transportation, and Utilities | 20,000 | 0.1% |
| Other Services | 10,000 | 0.2% |
| Professional and Business Services | 17,000 | 0.1% |
| Financial Activities | 5,000 | 0.1% |
| Information | -3,000 | -0.1% |
| Manufacturing | 4,000 | 0.0% |
The U.S. multifamily market is positioned for a favorable shift in 2025. With one quarter remaining in 2024, the nation is on track to see approximately 657,000 new unit completions by year-end, marking the highest annual total since the mid-1980s. However, current projections for the national development pipeline indicate a significant 55% decline in deliveries, down to 346,000 units in 2025. This anticipated drop in supply, combined with sustained strong absorption rates, suggests that demand could outpace supply in the coming year. Consequently, the market is expected to stabilize, with rent growth potentially reaching the mid-3% range by the end of 2025. This outlook, bolstered by a deceleration in new project deliveries alongside consistent demand, sets the stage for a more balanced and resilient multifamily sector.
Sources: Costar; ESRI; U.S. Census Bureau; Yardi Matrix; U.S. Bureau of Labor Statistics
