RealPage reports significant absorption of apartment units across the nation, with the South leading the charge.
Demand for multifamily housing continues to surge across the country, according to the latest multifamily report from RealPage Market Analytics.
“The impressive demand reading in the year-ending second quarter may be difficult to overstate,” said RealPage chief economist Carl Whitaker. “Some 390,000 apartment units were absorbed on net over the past 12 months. Dating back to the start of the new millennium, this latest annual reading ranks as one of the largest figures on record.”
Whitaker added that what’s most impressive is that 257,000 units have been absorbed during the first two quarters of the year, which is in line with the all-time high set in the pandemic-era demand surge that saw about 270,000 units absorbed in the first half of 2021.
While the gap is closing, the nation’s record supply of multifamily units continues to outpace demand. More than half a million market-rate units have been delivered in the past year, with an additional 629,000 units expected to deliver in the next 12 months.
According to RealPage, the narrowed gap is exhibited by stabilized occupancy and rent growth rates. In June, occupancy held steady at 94.2% for the third consecutive month. Year-over-year rents increased 0.2% last month.
“Though demand is arguably exceptional by historical norms, rent growth has yet to respond in a congruent manner,” Whitaker noted. “This ultimately points back to the interplay between supply and demand, whereby a four-decade peak in new deliveries is keeping rent expansion modest.”
Demand improvement was seen across all four regions in the year-ending second quarter, with the South dominating. RealPage cited some 226,000 units absorbed on net in the South in the past 12 months—this is nearly 60% of the total U.S. demand despite comprising just 42% of existing units.
The West recorded annual absorption of 89,000 units, which was its strongest annual figure in two years. The Northeast and Midwest remain more modest, with annual absorption figures of 30,500 and 44,100 units, respectively.
The Midwest is still leading the way for rent growth. Kansas City, Missouri, led the way with 3.8% year-over-year growth. Cleveland, Cincinnati, and Milwaukee also made the top five. Of the 10 major markets with annual effective rent growth of 2.5% or higher last month, all but one—Columbus, Ohio—posted concurrent annual inventory growth lower than the national norm.
Markets receiving the most new supply— Austin, Texas; Atlanta; and Dallas— experienced the most downward pressure on rents in June. Of the 10 major markets posting annual rents of 3% or deeper, they all had concurrent annual inventory growth above the national norm.