Apartment Absorption Down From Year-Ago Rate, Redfin Finds

(Illustration courtesy of Redfin)

Just over half of U.S. apartments that delivered in the first quarter rented within three months, the second-lowest seasonally adjusted share since mid-2020, according to Redfin, Seattle.

The figure represented an uptick from the previous quarter, which saw the slowest absorption rate of any quarter since early 2020. Redfin noted this may be a sign that building owners are attracting renters with more affordable rents and concessions.

The absorption rate for new apartments has been slower this year than the previous two years because of a spike in new apartment buildings being built, especially in Sun Belt metros that became popular destinations during the pandemic, Redfin said.

“With only around half of new apartments renting out within three months, not only do renters have more choices, they also likely have the ability to negotiate a better deal,” Redfin Senior Economist Sheharyar Bokhari said. “There’s a huge number of new apartments opening up, and building owners are competing with one another to fill them up quickly.”

Nationally, the rental vacancy rate for buildings with five or more units was 7.8% in the second quarter, up from 7.4% a year earlier, further indicating that apartment supply is slightly outpacing demand.

With less inventory available, studios filled up slightly faster than other bedroom types. Redfin found 58% rented out within three months, up from 42% a year earlier. Studio apartments were the only type to see completions fall in the first quarter, dropping 7.1% from a year earlier.

In comparison, 53% of new one-bedroom and two-bedroom apartments were rented out within three months, down from 58% a year earlier. Completions for both categories jumped more than 20% in the first quarter compared to a year ago.