Census Bureau: Multifamily Unit Absorption Up, But Slowing

The Census Bureau released its annual Survey of Market Absorption of New Multifamily Units, reporting increases in 2016 but noting a slowdown toward the end of the year.

The Census Bureau conducted the annual survey for HUD, reporting absorption rates for apartments completed in 2015. It reported 310,300 apartments of all types constructed in buildings of five or more units in 2015, the highest number reported by the Survey of Market Absorption since 2000, when 300,000 units were constructed.

The survey (https://www.census.gov/housing/soma/files/qtr416/q416Report.pdf) reported 261,800 privately financed, nonsubsidized, unfurnished rental apartments in buildings with five units or more completed in permit-issuing areas, 51,000 more rental apartments completed than in 2014 and the largest number of completions reported since 1988 (284,500). The median asking price for all condominium apartments built in 2015 was $461,100. Twenty-three percent of the 11,300 condominiums sold with an asking price of more than $700,000.

Other survey highlights:

— During the third quarter, 73,800 privately financed, nonsubsidized, unfurnished, rental apartments were completed in buildings with five units or more, 11,700 more units than the revised estimate of 62,100 units constructed in the second quarter. However, that figure represented 9,800 fewer than the 83,600 constructed from a year ago.

–Of the 257,900 new unfurnished rental construction in buildings with five units or more completed in the previous four quarters, 140,000 units were rented prior to the third quarter. The survey reported 68,200 units rented in the third quarter with 49,700 units remaining in the market available to rent at the end of the third quarter.

–Fifty-nine percent of seasonally adjusted newly completed, unfurnished rental apartments built in the third quarter were rented within the first three months after completion. This was 6 percentage points higher than the 53 percent for the second quarter, but the same as a year ago. Not seasonally, adjusted, 61 percent of newly completed, unfurnished rental apartments built in the third quarter were rented within three months of completion, 4 percentage points higher than 57 percent from the second quarter and essentially unchanged from a year ago.

–The median asking rent for all privately financed, nonsubsidized, unfurnished rental units completed in buildings with five units or more in the third quarter was $1,507, compared to $1,423 for the second quarter and $1,346 a year ago.

–The three-month absorption rate by asking rent ranged from 46 percent (units renting for more than $2,450) to 73 percent (units renting for less than $850). The median asking
rent for units absorbed within three months was $1,453.

–One-bedroom units (44 percent) made up the largest percentage of new unfurnished rental construction in buildings with five units or more during the third quarter. The percent of two-bedroom units were the next highest, accounting for 41 percent of new construction. Efficiency (no bedroom) and three-or more bedroom units accounted for 7 percent each.

–After three months, 64 percent of units with fewer than two bedrooms and 59 percent of the units with two bedrooms or more were absorbed.

–The South led the nation in new unfurnished rental construction in buildings with five units accounting for 46 percent of the total production. The next highest percentage was in the West with 26 percent. The Northeast and Midwest accounted for 14 percent of the new construction during the third quarter. After three months, the absorption rate ranged from 56 percent in the Northeast to 74 percent in the West.

–An estimated 6,100 condominium apartments in buildings with five units or more were completed in the third quarter, twice as many (3,100 more units) than the revised 3,000 condominiums constructed the previous quarter. Condominium and cooperative units accounted for 7 percent of all completions in buildings with five units or more during the third quarter. Seventy-four percent were sold within three months after completion, 13 percentage points higher than the revised three-month absorption rate of 61 percent in the previous quarter.

–The median asking price for a new condominium constructed in the third quarter was $473,300, compared to $651,200 in the previous quarter. Of the 15,600 total number of new condominium units in buildings with five units or more completed in the past four quarters, 7,800 units were sold prior to the third quarter. The survey reported 5,500 units sold in the third quarter and 2,300 units remained on the market for sale at the end of the third quarter.

–The survey estimated 87,900 apartments constructed in with five units or more in the third quarter, 16,500 units more than the 71,400 units built in the previous quarter. However this was 11,800 fewer than the 99,700 built a year ago.

–Of the remaining apartments completed in all buildings with five units or more in the third quarter 2,300 were available as furnished units and 5,200 units were federally subsidized or receiving a tax credit. Five hundred were classified as out of scope (i.e., dormitories, townhouses, timeshare, continuing-care, retirement units).