Bumper to Bumper – May 5, 2025
The apartment market still faces heavy volume of new deliveries this year and next
Highway traffic jams follow a variety of trajectories. There’s the bumper-to-bumper crawl which may not dissipate for miles and hours, there’s the gradual process of merging four lanes of traffic into three due to construction or some other obstruction, and then there’s the brisk pickup in speed as everyone passes a sight they simply had to slow down and study.
If you liken the heavy volume of apartment deliveries over the past couple of years to heavy volume on a highway, the gradual dissipation of bumper-to-bumper traffic might be the best analogy. The U.S. is now seeing a slower pace of deliveries, yet that doesn’t mean absorption has accelerated rapidly.
In fact, according to Trepp, the first quarter of 2025 saw absorption outpace deliveries. A total of 102,000 units were absorbed nationwide in Q1, while 95,000 units came online, according to Cushman & Wakefield data. This hasn’t happened since 2021
“Absorption—when previously vacant units are leased—could outpace deliveries this year, as fewer apartment units are slated for completion,” according to Trepp. Citing a Cushman & Wakefield report, Trepp notes that about 265,000 units will be delivered in 2025, or about half of what was completed in 2024.
Last year saw the smallest number of construction starts since 2012, with work starting on 230,000 units. The construction pipeline now totals 545,357 units, its lowest level since 2018 and a little more than half of its volume in 2023.
Permitting was also down in 2024, Redfin reported last week. Based on an analysis of Census Bureau data, the online brokerage found that developers obtained permits to build 12.4 multifamily housing units for every 10,000 people in the U.S. over the past year. That’s down 27.1% from 17 units per 10,000 people during the post-pandemic building boom, and down 5.5% from 13.1 units per 10,000 in the years leading up to the pandemic.
With COVID lockdowns in 2020 resulting in “a pent-up demand for units,” developers responded to the demand after restrictions were lifted. Absorption outpaced deliveries by about 60% in 2021, Trepp reported, but in the years that followed, it was a different story. 2022 saw about 120,000 units absorbed and about 350,000 units delivered; 2023 had nearly 250,000 units absorbed compared to 450,000 deliveries; and last year, 436,000 units were absorbed while 530,000 units were delivered.
In Q1 of this year, the South led the way in absorptions, with 54,377 units occupied—slightly outpacing deliveries. The West and North saw larger gaps between absorption and deliveries, while the Midwest had nearly 600 more deliveries than absorptions.
Although it remains to be seen whether Q1’s absorption/delivery balance is an anomaly or the beginning of a trend, Yardi Matrix data imply that the traffic jam of deliveries won’t be dissipating this year or next. The under-construction pipeline peaked in March 2024 and has since declined for 12 consecutive months, Yardi Matrix reported. However, contrary to the figures cited by Trepp, Yardi Matrix said the pipeline still contains “a large inventory that easily supports new supply in excess of 500,000 units in 2025 and 400,000 units in 2026.”
Construction start declines were well into the double-digit percentage range last year: down 36.4% compared to 2023, and down 40.7% from 2022 levels. “The large decline will drive a slowdown in new supply in 2026,” according to Yardi Matrix. “However, elevated completion times and a still-large under-construction inventory imply that supply will not completely bottom until 2027.”