While apartment move-ins and vacancy rates are showing some of the best performance numbers in three years, a 40-year high in unit openings is keeping rent growth muted, particularly in the Sun Belt.
The third quarter saw move-ins outpace move-outs by 176,000 units nationwide, according to a new report on the multifamily industry from Apartments.com. It was the highest level for the absorption metric the industry has registered since the third quarter of 2021. The move-ins helped push vacancy rates down on a quarterly basis for the first time since the end of that year.
The report by CoStar's Apartment.com showed nationwide vacancies now register at 7.8%, a 10-basis-point decline from the second quarter.
“If not for the record deliveries coming on line this year, the apartment market would be experiencing fantastic rent growth given the well above average demand being created for rental units,” Jay Lybik, national director of multifamily analytics for CoStar Group, said in a statement.
Despite the increased demand, national rent growth remained largely unchanged on a wave of new supply, according to the report. The third quarter saw 178,000 newly constructed units enter the market, keeping the multifamily industry on track to add 636,000 new units this year, the most in four decades.
The supply glut kept yearly growth in national asking rents at 1.1%, down from 1.2% at the end of July. According to the report, annual rent growth has hovered around 1% since mid-2023 after a rapid deceleration from peaks in 2021 and 2022.
On a quarterly basis, rents declined 0.5% from the second quarter after registering 100-basis-point improvements in rents each of the prior two quarters.
Regional trends
Rent growth was greatest in Washington, D.C. The nation’s capital ended the third quarter 3.5% higher than this time in 2023. Richmond, Virginia, and Detroit, the second- and third-best performing markets, rose by a similar 3.4%.
Nine of the top-performing markets saw rent growth at or above 3% with Midwestern locales overrepresented. North New Jersey and Boston rounded out the 10 highest growth markets, each registering a 2.9% increase in rents over the year.
Nine of the 10 worst-performing markets are in the Sun Belt where a disproportionate amount of supply has entered local inventories. Austin, Texas, posted the largest rent declines with a 4.7% drop over the past year. Raleigh, North Carolina; Jacksonville, Florida; Phoenix; and Atlanta all declined between 2.9% and 1.9%.
Apartment.com noted that property operations could vary widely over the remainder of 2024 and through the first half of 2025 depending on location and relative price point. Sun Belt markets and luxury properties remain most at risk to oversupply conditions. Markets in the Midwest and Northeast, along with mid-priced properties, are less affected by supply issues and could overperform in the coming quarters, according to the report.