Why Apartment Absorption Shattered Expectations in 2024

Subscribe to our newsletter and get real estate investing tips, and passive investment opportunities that will help you gear up for your financial success.

Follow me on LinkedIn to get the latest market updates and investment opportunities.

2024 wasn’t just a record year for apartment supply but also a standout year for demand. While many analysts expected renters to pull back, data from RealPage and CoStar tells a different story. Let’s dive into the numbers, explore what drove this demand, and highlight the markets that stole the spotlight. A Record Year for Apartment Absorption

RealPage data revealed that 2024 apartment absorption topped new supply and came close to breaking the all-time high set in 2021. CoStar’s figures show demand nearly outpaced supply, with a stunning 70% higher absorption levels than in 2023.

This surge wasn’t just a numbers game. The renters driving demand spent less than 23% of their income on rent – a promising indicator of financial health in professionally managed, market-rate apartments.

What’s Behind the Boom?

While high home prices and mortgage rates likely kept some renters from transitioning to homeownership, the narrative isn’t that simple. In 2024, an impressive 557k to 667k net new apartment renter households were created, according to CoStar and RealPage.

The surge was driven by pent-up demand, with new apartment construction in high-supply regions unlocking opportunities for renters across the country.

Regional Highlights: Where Demand Soared

1. Top Absorption Markets: Dallas, Houston, and Austin led the nation in apartment absorption, accounting for 18% of the national total. Over 61% of all net new apartment households flocked to the Sun Belt or Mountain regions, with Texas taking the crown.
2. Markets with Demand Surpassing Supply: Washington DC, Houston, and Las Vegas outperformed supply by over 4,000 units, signaling strong renter activity. Other markets like Phoenix, Jacksonville, Seattle, Philadelphia, and Dallas also absorbed more units than they delivered. 3. Where Supply Outpaced Demand: Unsurprisingly, Austin saw the largest gap, with nearly 1,800 more units delivered than absorbed. Despite the gap, demand here remained resilient.

What Does This Mean for 2025?

With strong demand and continued construction, 2025 could see a continuation of these trends in high-supply regions, particularly in the Sun Belt and Mountain states. Understanding where demand is going is key to staying ahead for renters and developers alike.

Stay informed on apartment market trends! Subscribe now for exclusive updates and in-depth analysis to guide your next move.