Resounding Appetite for Apartments Overtakes Oversupply Fears in 4th Quarter 2024

U.S. apartment demand hit its highest level in nearly three years in 2024’s 4th quarter and easily outpaced concurrent new supply, which reached decades-long highs in 2024.

“The U.S. apartment market has responded to the fears of oversupply with resounding appetite,” RealPage Chief Economist Carl Whitaker said.

In the October to December quarter, the U.S. absorbed 230,819 market rate apartment units, buoying annual demand to 666,699 units – the highest annual recording since 1st quarter 2022. At the same time, 155,408 new units were delivered in 4th quarter, propelling annual supply to 588,883 units, according to data from RealPage Market Analytics.

As such, the imbalance between supply and demand has reversed, allowing for the first true absorption surplus of apartment demand since mid-2022.

With demand outpacing supply, the U.S. posted a meaningful annual occupancy bump to stand at 94.8% in December. Meanwhile, rent change remained flat under the weight of near-historic new supply volumes. U.S. apartment rents were cut on a monthly basis in each of the final three months of 2024, but those cuts were slightly less deep than the year-earlier rent cuts, appearing to marginally boost rent growth to a still-muted 0.5% growth in calendar 2024.

Texas Markets Post Strongest Demand in Nation

Dallas posted the most apartment demand in the U.S. during calendar 2024, absorbing a remarkable 36,724 units. Neighboring Fort Worth absorbed another 7,681 units. Houston claimed the second highest absorption tally in the nation in 2024 (31,925 units), followed by Austin in the no. 3 spot (29,515 units).

As demand and supply are highly correlated, it makes sense to see several of the same markets topping the 2024 supply leaderboard as well, as that is again led by Texas markets.

Outside of the supply and demand leaders on a nominal basis, several major markets posted significant net demand, or absorption well above concurrent new supply. In Washington, DC, absorption towered above concurrent supply by over 7,700 units in 2024. In Houston, surplus demand toped 6,800 units. Las Vegas, Los Angeles and Indianapolis all posted demand for over 3,000 units above concurrent new supply volumes in 2024. As such, occupancy climbed in recent readings in all five of these markets.

Across the nation, the pool for rental housing demand continues to grow, as influenced by a number of factors. Job growth, while slowed from the post-pandemic rebound, remained stable. Wage growth continued to outpace rent growth, resulting in stable and falling rent-to-income ratios for market rate apartments. Cooling inflation and rising consumer sentiment help fuel household formation. Meanwhile, current renters renewed their leases at higher rates in 2024.

“The data suggests that the multifamily industry has ‘found the floor’ in 2024,” Whitaker said. “And it’s equally important to note that the past year has set the stage for operators to view the upcoming year as arguably the most ‘normal’ set of conditions seen since the turn of the decade. While the theme of some locally soft apartment markets will carry forward into 2025 (largely areas working through massive waves of new supply), it’s becoming increasingly evident that the apartment market at-large turned a corner in 2024 with 2025 setting up to be a year characterized by continued improvement.”