Reis reported that the apartment vacancy rate was at 4.4% in Q3 2016, unchanged from Q2, and up from 4.3% in Q3 2015. The vacancy rate peaked at 8.0% at the end of 2009, and bottomed at 4.2% in 2014 and early 2015.

A few comments from Reis Economist Barbara Denham:

For the sixth quarter in a row, new construction exceeded net absorption in the apartment market but only by a slim margin: 37,744 in completed units to 37,693 absorbed units. … While there is a chance that the vacancy rate for the third quarter could still increase once the data is finalized, we had anticipated this and do not fear that rent growth will slow dramatically. In fact, rent growth in the third quarter, 0.9%, was in line with our forecasts and demonstrates the health of the apartment market. New construction should continue to exceed net absorption in most of the coming quarters …

Asking and effective rents both grew by 0.9% during the third quarter, slightly below last quarter’s growth of 1.1% and well short of the post-recovery high of 1.7% quarterly growth rate seen in Q3 2015. We had expected rent growth to slow so do not view this deceleration as cause for alarm. In fact, the gap between asking rents and effective rents – that net out concessions such as free rent – has not widened in the last few quarters which suggests that landlords generally remain confident that conditions will continue to improve in the wake of stronger job growth, although rents have declined in a few of the top submarkets.

The deceleration in rent growth is seen in the year-over-year growth rates. Since Q3 2015, asking and effective rents have grown 3.8%, a decline from the 4.6% year-over-year growth in asking rents and 4.5% growth rate in effective rents.

Market conditions in the apartment market softened a bit in the third quarter, a period they generally see the highest activity and strongest rent growth. We had expected this deceleration given the robust construction underway throughout the U.S. Evidence that recent multifamily permits have slowed considerably suggests that developers, and likely lenders, are concerned about leasing the plethora of units expected to come online in the coming year or so.
emphasis added

Apartment Vacancy Rate Click on graph for larger image.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Reis is just for large cities.

The vacancy rate had been mostly moving sideways for the last few years.  Now that completions are catching up with starts, the vacancy rate has started to increase a little.

This suggests rent growth – and multi-family starts – will slow a little.

Apartment vacancy data courtesy of Reis.