Demand for apartments hits cyclical record
Consumer demand for apartments hit an all-time high in the third quarter of this year, with new data from RealPage showing the number of occupied apartments nationwide jumped by 255,094 units from July to September. The numbers mark the largest quarterly absorption since the 1990s.
Annual demand data in Q3 recorded 597,354 units, well above a previous cyclical peak of 380,000 units recorded in the third quarter of 2018. Annual demand during the decade from 2010 to 2020 was in average of about 250,000 units.
Demand has been particularly strong in Category A projects, and aggregate demand has been supported by rising homeownership costs and highly competitive housing markets, both of which have pushed potential buyers back to the market. location. Demand was also supported by the increase in household formation.
Gateway subways look set for a comeback after being nearly wiped out by the darkest hours of the pandemic; New York topped the metropolitan demand estimates for the third quarter, pushing Dallas / Fort Worth out of its usual number one position. The number of occupied apartments in New York City increased by 24,800 units during the quarter.
Quarterly absorption reached 16,500 units in Los Angeles, 12,100 units in San Francisco, the Oakland and San Jose subways combined, about 11,700 units in Washington, DC and about 10,300 units in Chicago, according to RealPage. .
In non-gateway cities, the number of occupied apartments increased by just over 19,000 units during the third quarter in Dallas / Fort Worth, including 14,700 in the Dallas subway. Houston also saw its number increase by about 15,300 units.
Also of note: “The extremely high apartment occupancy rate dampened the demand for apartments in some locations during the third quarter,” according to RealPage. “There was hardly any product available for absorption in subways like Riverside-San Bernardino, Virginia Beach, Sacramento, Greensboro / Winston-Salem and Memphis.”
RealPage analysts predict that near-term apartment demand will remain well above historical norms, but that absorption is likely to slow from 2021 highs.
anticipating that near-term demand for apartments in the United States will remain well above the historical norm. However, it seems likely that the absorption volume of the product will decrease to some extent from the high level of 2021.
“With favorable rents now mainly in the rear view mirror in passing subways, the return of demand in these areas could slow,” the report notes. “Younger tenants have played a particularly important role in the apartment rental business in entry subways in 2021, with reduced prices stimulating demand from households who previously could not afford to live in these locations. unless they team up in several roommate households. At this point, rents are roughly equal to or significantly higher than pre-pandemic prices everywhere except in the San Francisco Bay Area. “
RealPage also predicts build for hire LICOs will drain demand rentals, especially in the Sun Belt where such construction is in full swing, but “we’ll have to wait and see how the sources of demand for this product line are split between those who previously rented apartments, those who previously rented older single-family products to predominantly mom-and-pop owners, and those who are downsizing the larger single-family homes they owned, ”RealPage analysts note.