In 2023, the apartment market saw a record high in supply, with nearly 440,000 units completed and another 671,000 scheduled for delivery in the following year. However, this surge in construction was met with a different leasing landscape than anticipated due to changing occupancy rates and rent growth. According to RealPage data analysis of U.S. metro areas across various regions such as Sun Belt and West Coast experienced significant new supply entering the market leading to falling rents while Midwest or Northeast regions produced strong rent growth.
The current trend is expected to continue into 2024 as there has been a slowdown in new construction starts due to higher financing costs and softer fundamentals. This increase in supply has been beneficial for renters but poses challenges for investors according to RealPage chief economist Jay Parsons who states that “it’s all about supply.” The markets experiencing multi-decade highs of new apartment deliveries are also seeing falling rents despite strong demand.
RealPage projects that these same markets will continue seeing elevated levels of deliveries throughout 2024 before plunging dramatically thereafter due to recent trends indicating lower starts linked with higher financing costs and weaker fundamentals.
