Renters Get Boost From Slow Absorption
MHN columnist Lew Sichelman on what a buyer's market looks like for some residents today.

The absorption rate of new apartments remained near historical lows in last year’s fourth quarter, according to the latest Census Bureau report, as the number of completions posted a third straight quarter of above 100,000.
The most recent absorption rate stands at 45 percent of the 126,100 units finished in the fourth quarter, Census data shows. That’s a significant drop-off from its 75 percent peak in the third quarter of 2021. But the National Association of Home Builders puts a positive spin on those figures, which cover new units in residential buildings with five or more units.
“The large number of units completed each quarter continues to be a positive sign on the overall inflation front as shelter inflation remains stubbornly high,” said NAHB Economist Jesse Wade. “More new apartments should help slow rent growth to lower levels in the coming months.”
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But others put a slightly different twist on the latest numbers. During this period of low absorption, renters can be choosier about where they want to live and they may benefit from concessions, Sheharyar Bokhari, a senior economist at the Redfin brokerage company, noted in a recent prepared statement.
The fourth quarter absorption rate, which was the highest since the start of 2021, continues to lag behind pre-pandemic norms, Bokhart noted.
Apartments are taking longer to rent because a record number are coming onto the market. Nearly 125,000 new apartments were completed in the fourth quarter—the second highest number on record—following the previous quarter’s all-time high of 142,900.
But approvals for multifamily construction permits have dropped to pre-pandemic levels, so the supply will start to taper off in coming months. And eventually, absorption rates will begin rising again, leading to more stable rents, if not an uptick in them.
Larger, three-plus bedroom units completed in the fourth quarter rented more quickly than other, smaller apartments. Some 53 percent of those were leased within the first three months after completion, even though there was a nearly 59 percent year-over-year increase in those completions.
The absorption rate for more common one-bedroom apartments was 44 percent, up from 40 percent a year ago. That was the same rate recorded for two-bedroom units, up from 41 percent. Studio units were taken down at a rate of 47 percent.
Along with the three-month absorption rate and completions, Census reports absorption rates within six-months, nine-months, and 12-months of completion.
The 12-month rate—just 90 percent—stood at its lowest level in 2024’s fourth quarter since the start of the pandemic. That means 10 percent of the 99,850 units completed during the period remained vacant a year after they were finished.
Regional data shows that unoccupied apartments completed more than a year ago are located largely in the Midwest and West, 12 percent each, while the Northeast showed only a 2 percent vacancy rate.
As for condominium and cooperative apartments, the three-month absorption rate stood at 67 percent at the end of last year, when total completions had fallen to just 2,880. Condo and co-op completions peaked in the second quarter of 2018 at 7,996 and have fallen steadily ever since.