Demand for apartments across the U.S. has never been higher, and the supply side is failing to keep up despite its best efforts.

Absorption of multifamily units jumped by more than 255,000 in the third quarter, according to data from property management and analytics platform RealPage. That represents the largest figure for a single quarter in records that reach back to the early 1990s and comes just as the annual demand volume of over 597,000 is miles past what has previously been recorded  — more than 200,000 above its most recent peak in Q3 of 2018.

The demand volume curve has gone nearly vertical in the first three quarters of this year, reflecting an unleashed market that was all but frozen for most of 2020. A dip in rent prices, a little more money in the bank and a job market more favorable to applicants for the first time in a generation all combined to form an unprecedented rush — one that might have peaked in the third quarter, RealPage reports.

Average rents have recovered from their pandemic nadirs in every major market of the U.S. except the San Francisco Bay Area, and in most markets have far surpassed pre-pandemic levels. The New York metropolitan area led all U.S. markets in net absorption in Q3, overtaking the Dallas-Fort Worth metro that had held the top spot for multiple quarters.

A significant portion of the jobs added so far this year have been in well-paying sectors, corresponding to Class-A apartments having the strongest Q3 among multifamily classes, RealPage reports. Near-term job growth going forward is expected to be among lower-wage jobs, which have less correlation with apartment demand.

Multifamily developers have been working hard to respond to the current trends, with new construction permits totaling over 57,000 units issued across the U.S. in August, according to U.S. Census Bureau data reported by CoStar. That represents the hottest month for new permits since June of 2015.

That a month with historic levels of construction permits represents less than a tenth of Q3's estimated demand reflects a shortage of housing in the U.S. that is worsening at an accelerating pace. Compounding the supply shortfall is that the supply chain for materials, fixtures and appliances remains rife with delays and shortages, while labor also remains short of demand. Even a record number of office-to-multifamily conversions has not closed the gap.

Such a discrepancy between supply and demand is unambiguously good news for one group: investors. The average price of multifamily assets has grown faster than the red-hot industrial sector in the past couple of quarters. This acceleration, coming at a moment with rare levels of liquidity, has seen large investors opting to acquire whole companies rather than rolling up individual assets.