New Apartments Are Filling Up at Nearly the Slowest Pace on Record, But That May Change as Builders Pull Back

• Just 47% of newly-built apartments completed in Q3 were rented within three months as a record number of new apartments hit the market.
• But construction permits have started to decline, signaling that the number of new rentals will eventually start to fall, which could cause rents to tick up.

Less than half (47%) of newly built apartments completed in the third quarter of 2024 were rented within three months. That’s tied with the fourth quarter of 2023 for the lowest share on record aside from the start of the pandemic.

This is according to a Redfin analysis of the U.S. Census Bureau’s seasonally adjusted absorption rate data for unfurnished, unsubsidized, privately financed rental apartments in buildings with five or more units, dating back to 2012. The most recent data available covers apartments completed in the third quarter of 2024, and either rented or not rented within three months of then. 

Apartments are filling up slowly because renters have a lot of options to choose from; there were 142,900 new apartments 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 moving frenzy, apartments were filling up at record speed due to soaring demand, which drove up rents. To help meet that demand, builders ramped up construction, which led to more vacancies and lower rents. The rental vacancy rate for buildings with five or more units ended 2024 at 8.2%— the highest level since the start of 2021. The median U.S. asking rent is now $1,607, up 0.4% year over year but roughly $100 below its record high. While rents are no longer falling like they were in 2023, the small increases they’re posting are a far cry from the double-digit growth seen during the pandemic.

Studio apartments are filling up faster than last year

The absorption rate for apartments completed in the third quarter was roughly the same across bedroom types: around 50%. With the exception of studio apartments, all bedroom types were absorbed at a slower pace than a year earlier.

Half (50%) of studio apartments completed during the third quarter were rented within three months, up from 42% a year earlier. Meanwhile, the absorption fell to 49% from 54% for 1-bedroom apartments, fell to 50% from 51% for 2-bedroom apartments, and fell to 51% from 56% for 3+-bedroom apartments. The market for studio apartments may be holding up relatively well because there aren’t as many available; completions of all other bedroom types posted double-digit increases in the third quarter, while completions of studios only rose 0.4%.

Please note that absorption rate data by bedroom type is not seasonally adjusted.

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