Absorption Rate of New Multifamily Units Increases in Q2 as Completions Near 100,000 Units

According to the latest release of the US Census Bureau Survey of Market Absorption of New Multifamily Units (SOMA), with additional analysis provided by the National Association of Home Builders (NAHB), of the 99,290 unfurnished, unsubsidized apartments completed in Q2, 65% were absorbed into the market in the first three months following completion. Of the 3,467 condominiums completed in Q2, 83% were absorbed within the first three months following completion.

According to the SOMA report, with over an estimated one million multifamily units currently under construction, the level of completed apartments rose to its highest level in Q2. The number of completions in Q2 was at 99,290, which represents a 19.6% increase over Q1 and a 29.6% increase over 2022Q2.

The NAHB notes that the percentage of apartments absorbed within three months following completion was at a non-seasonally adjusted rate of 65%, which is 8 percentage points higher than the Q1 absorption rate but 7 percentage points below 2022Q2. Because the absorption rate is non-seasonally adjusted, the NAHB believes the absorption rate likely peaked seasonally for apartments in Q2.

Looking ahead, the NAHB predicts that apartment completions will continue to set record highs as new units roll out into the market. This will help slow rent growth, a significant factor in inflation, the NAHB says. The rent data reported from SOMA shows two consecutive quarters of asking rent declines for newly completed apartments, with $1,763 being the median asking rent in Q2.

In regard to condominiums, the number of condo units completed in Q2 was reported as 3,467 units, which is 32.6% lower than 2022Q2. The percentage of these condo purchased within three months following completion stood at 83%, the third consecutive quarter where newly completed condos were absorbed into the market at a rate of 80%. The listed sales price of new condos was at a median of $532,200 in Q2, down 26.7% from one year ago.