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Healthy demand continued for the multifamily market in the third quarter, according to the latest research from CBRE.

Despite record new supply, the vacancy rate held steady, inching up by 10 basis points (bps) quarter over quarter to 5.1%. This was slower than the 30-bp increase in the first quarter and the same as the second quarter.

New construction deliveries saw a high of 114,600 units in the third quarter, bringing the four-quarter total to 376,500 units, which is the highest amount since CBRE began tracking the market in 1996. The top five markets for new deliveries over the past four quarters were New York; Washington, D.C.; Dallas; Austin, Texas; and Los Angeles, making up 25% of the national total. CBRE noted that moderate construction starts will mean fewer deliveries beginning in 2025.

According to CBRE, net absorption increased to 82,100 units in the third quarter, which indicates a return to more seasonal demand that the pandemic had disrupted in 2021 and 2022.

“Renter demand remained healthy through the third quarter, largely offsetting record new construction,” said Kelli Carhart, leader of multifamily capital markets for CBRE. “We anticipate investment activity to pick up mid-2024, driven by an end to the Fed’s rate hiking cycle and improved capital market conditions, as well as loan maturities that will create transaction opportunities.”

While the average net effective rent increased 0.7% year over year in the third quarter, this was below the pre-pandemic five-year average of 2.7% and well below the year-over-year peak of 15.2% in 2022’s first quarter. CBRE noted that markets with the most constructions deliveries saw the biggest declines in rent growth.

The Midwest and Northeast/Mid-Atlantic regions led for year-over-year rent growth in the third quarter. Both down from 4.3% in the second quarter, the Midwest saw 3% growth, followed by the Northeast at 2.9%. According to CBRE, the Southeast, South Central, Mountain, and Pacific regions also saw negative average rent growth.

While multifamily investment volume was down for the third quarter—$29 billion compared with $75.8 billion a year ago—it did maintain the largest share of commercial real estate investment volume with 34% for the quarter.