Multifamily Absorption Rates Fall to Decade Low as Completions Remain Elevated

The Census Bureau’s latest release of the Survey of Market Absorption of New Multifamily Units (SOMA) estimates that 42% of 91,060 unsubsidized apartments completed in the fourth quarter of 2023 were absorbed (rented) within the first 3 months following completion. For condominiums, 56% of the estimated 4,915 units completed in the fourth quarter of 2023 were absorbed (purchased) in the first three months following completion. All statistics from the SOMA refer to apartments/condos in newly constructed buildings with five units or more.

Apartments

For apartments, the non-seasonally adjusted absorption rate for the fourth quarter was ten percentage points lower than the third, from 52% to 42%. Over the year, the rate was down 14 percentage points. The absorption rate has fallen 35 percentage points after peaking at 75% in the third quarter of 2021 as newly constructed multifamily units started entering the market.

The number of estimated unsubsidized apartments completed in the fourth quarter was 91,060 marking only the third time in the data that completions were above 90,000. The other occurrences were in the third quarter of 2020 (93,750) and the second quarter of 2023 (95,860). Completions were up 4.0% from the third quarter of 2023 and up 13.4% from the fourth quarter of 2022.

Condominiums

The condominium absorption rate fell to 56%, the lowest level since the second quarter of 2019 (54%). The absorption rate has fallen 23 percentage points from the start of the year as condo completions moved upwards.   Condominium completions were at an estimated level of 4,915 in the fourth quarter of 2023, up 3.0% from the previous year and up 9.6% from the third quarter of 2023.