Nearly half (49%) of newly built apartments completed in the fourth quarter of 2024 were rented within three months, up slightly from 47% the previous quarter. According to a new data report from Redfin (NASDAQ: RDFN), this marked the fifth consecutive quarter that the rental absorption rate was below 50%.
Redfin also noted the rental vacancy rate for buildings with five or more units was 8.2% in the first quarter of this year, a level that tied with the previous quarter for the highest level since the start of 2021.
Larger 3-plus bedroom apartments completed in the fourth quarter were rented at the fastest rate among different bedroom types, with 53% leased out within three months. The absorption rate for both 1-bedroom and 2-bedroom apartments was 44% within three months while studio apartments recorded a 47% rate.
The lethargy in acquiring new tenants could not be attributed to a lack of supply – 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. With supply outpacing demand, asking rents dipped recently after remaining largely stable over the past two years.
“Renters are in a relatively rare position where they can finally benefit from market conditions rather than scramble to keep up with them,” said Redfin Senior Economist Sheharyar Bokhari. “With more apartments available, renters can afford to be a little more picky about where they want to live and are in a stronger position to negotiate for concessions like flexible lease terms, lower rents or free parking.”
However, the market is poised for a change – Redfin noted that approvals for multifamily construction permits have dropped to pre-pandemic levels, which suggests new apartment supply will start to taper off in coming months and, thus, result in an uptick in asking rents.
