Apartment Absorption Rate Remains Stable

Recently released data from the US Census Bureau’s Survey of Market Absorption (SOMA) shows that 54,300 privately financed, non-subsidized rental apartments in buildings with 5 or more units were completed in the first quarter of 2016.

Compared to the previous quarter, completions (seasonally adjusted) decreased by 19 percent. However, completions increased by 25 percent year-over-year, from 43,300 in the first quarter of 2015 (Figure 1).

It is important to note that multifamily starts (structures with 5 or more units) were also down in the first quarter of 2016, from its peak in the second quarter of 2015.

Figure 1: Apartment Completions and Not Seasonally Adjusted Absorption Rates by Quarter, 2006-2016

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The not seasonally adjusted absorption rate (percent of units rented in 3 months after completion) increased one percentage point to 58 percent in the first quarter of 2016. The absorption rate is slightly down year-over-year from 60 percent in the first quarter of 2015.

The for-sale market is gradually improving with condominium and cooperative completions edging up to 3,600 in the first quarter (Figure 2). Condominium and cooperative completions increased by 67 percent year-over-year.

Figure 2: Condominium and Cooperative Completions and Absorption Rates by Quarter, 2006-2016 (Not seasonally adjusted)

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The condominium and cooperative absorption rate decreased to 64 percent from 70 percent in the first quarter of 2015. However, the number of condominiums and cooperative units sold (2,304 units), within the first three months after completion, is still significantly higher than units sold in the first three months after the first quarter of ’15 (840 units).

Figure 3 shows the number of subsidized apartments and apartments associated with tax credits, also collected in the SOMA. In the first quarter of 2016, 6,200 subsidized or tax credit-related apartments were completed, which represents approximately 9 percent of total apartment completions. Completions of subsidized apartments and apartments associated with tax credits increased by 27 percent year-over-year.

Figure 3: Subsidized Apartments, and Apartments Associated with Tax Credits Completions, 2006-2016

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