Permits to construct apartments have taken a dip since the coronavirus pandemic, an analysis from real estate company Redfin found, amid falling appetite among builders.
The analysis, published Tuesday, found that “builders obtained permits to construct 13 multifamily housing units for every 10,000 people” in the country this year — a 30-percent drop compared to similar windows between 2021 and 2023.
The analysis cited higher interest rates putting upward pressure on borrowing costs for construction projects as a key factor behind the decline, as well as the challenges facing property owners to find tenants for multifamily units that have already been completed.
According to a report released by Redfin last week, new apartments completed in the fourth quarter were rented at the slowest pace since early 2020.
At the same time, the company said Tuesday that asking rents have risen less than 1 percent “from a year ago—a far cry from the 18 percent growth seen during the pandemic—though they are still at the highest level since 2022.”
Redfin senior economist Sheharyar Bokhari said “prospective renters should be aware that now may be a better time to sign a lease than later.”
“Property owners might start jacking up rents again once all of the new apartments hitting the market fill up with tenants and there’s no longer so much supply, which could be the case in a year or two.”
Redfin also found that rent prices are decreasing in metro areas that saw building booms during the pandemic.
“Median asking rents are down from a year ago in 16 of the 33 metros for which Redfin has rent-price data. In many of those metros, rents are falling because multifamily construction has ballooned, meaning building owners are competing for tenants,” the company said.
“The 16 metros where rents are falling permitted an average of 14 multifamily units per 10,000 people in 2021-2023. By comparison, the metros where rents are rising permitted an average of just seven units per 10,000 people.”