Q4 of 2016 saw a rise in completion of multifamily homes, including apartments and condominiums, according to the most recent Survey of Market Absorption (SOMA), which is produced by the U.S. Census Bureau in conjunction with the U.S. Department of Housing and Urban Development.
Apartment completions—classified as buildings with 5 or more units—rose to 73,300 in the final quarter of 2016, a 9 percent increase year-over-year from 67,300. Similarly, condominiums and co-op completions were up to 6,500 from 3,200 a year prior. In the last two years, there have been over 250,000 new apartments entering the market, and the number of completed condominiums has more than double from 2014 to 2016—increasing from 8,000 units to 19,000 units.
Absorption, however, has been down for both apartments and condominiums. The number of apartments rented within 3 months of their completion was at a near-decade low—48 percent—compared to 55 percent a year prior. Absorption numbers haven’t been below 50 percent since Q4 of 2009.
Condominium absorption numbers are also faltering at a much higher rate than apartments. Only 47 percent of condos completed were absorbed in Q4 2016, compared to 81 percent in Q4 2015. The last time condominium absorption rates saw numbers that low was in Q4 2011.
The report notes that, because completions of new multifamily housing has been on the rise for the last couple of years, it is not out of the ordinary that absorption would slow in the face of a larger inventory pool.
The slowdown, although steep compared to Q3, does not entirely point to an emerging trend, the report also notes. Apartment absorption has been on the rise since Q3 of 2015, and condominium absorption has stayed above the latest dip in Q2 of 2015 for six straight quarters.