I continue to remain very bullish on investing in apartments in cities in the path of progress (e.g. growing population, job growth, wage growth, tight supply, etc). 

Great data driven insights from Jay Parsons below.

“I was bullish on apartment demand going into 2024, but not THIS bullish. RealPage data shows apartment absorption actually TOPPED new supply last year and came in just shy of the all-time high set in 2021.

You could quibble with absorption methodologies a bit and argue supply (which hit a 50-year peak in 2024) was higher. CoStar reported more supply than demand, but still at far smaller margins than probably anyone predicted -- and absorption 70% higher than 2023.

So no matter how you slice it or spin it: Apartment demand came in much hotter than expected for 2024. And it came from renter households spending less than 23% of income toward rent -- an encouraging sign of health among renters in market-rate, professionally managed apartments.

What's driving all this well-qualified demand?

I'm sure we'll see plenty of articles linking strong apartment demand to weak home sales. And it's an easy connection to make, but also grossly simplistic. Remember: Households typically rent before they buy. So while certainly more renters stayed in place due to high home prices and mortgage rates, it doesn't explain the 557k (CoStar) to 667k (RealPage) net new apartment renter households created in 2024.

So there’s clearly a lot of net new demand, and it appears the big wave of new apartment construction is unleashing a lot of pent-up demand.

To that point, demand is going where supply is going. Three Texas metros -- Dallas, Houston and Austin -- led the nation in apartment absorption in 2024. Texas alone accounted for 18% of the national total; and overall, 61% of all net new apartment households went to the high-supplied Sun Belt or Mountain regions.

Some highlights at the metro level:

1) Three markets where demand exceeded supply by a wide margin (>4k units): Washington DC, Houston and Las Vegas. DC has long been a top performer. Houston and Vegas could be positioning as potential faster rebound markets.

2) Some other high supply markets that saw more absorption than supply in 2024: Phoenix, Jacksonville, Seattle, Philadelphia and Dallas – all 1k+more absorption than supply. Seattle and Philly were solid performers throughout 2024, while the other three had seen great demand but even more supply until now.

3) On the other end, which market had the biggest gap in terms of more supply than demand in 2024? This will surprise no one -- Austin. And it’s a big gap but not a crushing one at nearly -1,800 units.“
- Jay Parsons, Rental Housing Economist (Apartments, SFR)