The U.S. multifamily market has seen a resurgence in demand, absorbing 138,000 apartment units in Q3 2024, the fourth-highest on record. This strong demand has been fueled by international migration and a robust labor market, with net absorption for the year up 44% compared to 2023. Vacancy rates have remained stable at 8.7%, a minor increase of 20 basis points from last year, despite a significant supply influx of over 400,000 new units. Markets like Huntsville, Nashville, and Austin are leading in both demand and new deliveries, showing strong leasing activity even in areas with higher vacancies.
Rent growth is also improving, reaching 2% year-over-year in Q3 2024, up from 1.5% earlier in the year. Although rent growth remains below the pre-pandemic average of 4%, the upward trend is a positive sign after several quarters of stagnation. Cities like Buffalo, Hartford, and Tulsa are leading the nation with rent growth exceeding 5%, while former pandemic hotspots like Austin and Phoenix are seeing rent declines moderate. These trends suggest that while the market is not fully back to its previous growth trajectory, recovery is underway in most regions.
Meanwhile, new construction is slowing significantly due to high interest rates and declining values. The total number of units under construction has dropped to 609,000, a 36% decrease from the peak in early 2023. Major markets like Austin, Dallas/Fort Worth, and Houston have seen the largest declines in their development pipelines. This reduction in new supply, combined with strong demand, sets the stage for vacancy rates to tighten and rent growth to continue rising in the coming quarters.
KEY TAKEAWAYS:
Booming apartment demand: Q3 2024 saw 138,000 units absorbed, the fourth-highest on record.
Rent growth reacceleration: Year-over-year rent growth hit 2% in Q3, up from 1.5% earlier in the year.
Stable vacancy rates: National vacancy rates remained flat at 8.7%, despite a supply surge.
Construction slowdown: New units under construction fell by 36%, with 609,000 units in the pipeline.
Leading markets: Huntsville, Austin, and Nashville saw strong leasing activity and rent growth.
Dear reader,
Investing in a multifamily project has many advantages as, on balance, real estate offers lower economic and inflationary risks than stocks.
Of course, the decision to invest in real estate or invest in stocks or bonds or other asset classes, which offer different risks and opportunities, is a choice which depends on an investor's risk tolerance, objectives, financial status and investment style.
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Yours sincerely,
Anna & Peter Tan
SuiteLifeMF has acquired, operated and invested in real estate for over 10+ years, investing in over 1500 doors and with over US$ 100 under management (900+ doors). The company also operates a property management company which handles a portfolio of single family homes. SuiteLifeMF maintains a disciplined approach to investing, which focuses on capital preservation and strong returns with a deep understanding of submarkets, economic and political situations.
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