Newly Constructed U.S. Apartment Buildings are Slower to Rent

Redfin reported on Monday (7-1-24) that according to their data only 47% of newly constructed apartments that were completed in Q4 2023, were rented within three months of being available. Redfin notes that its down from 60% a year earlier and is the lowest seasonally-adjusted share on record aside from Q1 2020, when the onset of the pandemic brought the housing market to a standstill.

Redfin says that new apartments are taking longer to rent because of the sheer number of them hitting the market, meaning building owners are competing with one another for tenants. There were 90,260 new apartments completed in the Q4 —the second highest number in records dating back to 2012, the record  high was set in Q2 of 2023. Furthermore, for the past  three quarters, the rental vacancy rate has hovered at 6.6%. That’s the highest level since 2021, though it’s worth noting that the vacancy rate is no longer growing like it was during the pandemic.

In a separate report Redfin data reported that the median U.S. apartment asking rent rose 0.8% year-over- year in May 2024, to the highest level since October 2022. The same reported said that renters today must earn $66,120 to afford the median priced apartment—$11,408 more than we estimate the typical U.S renter earns. But rental affordability does vary greatly from market to market.

Adding additional background to the rental market reports, Redfin’s Senior Economist Dr. Sheharyar Bokhari said, “If you’re looking for a rental and you’ve noticed a lot of new apartments popping up in your neighborhood, it may mean you have room to negotiate on price or ask for concessions like discounted parking or a free month’s rent. But if you live in an area where the supply of new apartments is limited, deals may be harder to come by. Building more housing is a tried-and-true way to ease the housing affordability crisis, and with rent and home prices at historic highs, local and federal leaders should continue to encourage more construction.”