Apartment Occupancy, Rents Rise
RealPage, Richardson, Texas, reported U.S. apartment occupancy approached a record level in the third quarter.
Unsurprisingly, apartment rents also continue to increase, said ApartmentList.com, San Francisco.
Occupancy climbed to 96.3 percent in the third quarter, up from 95.9 percent a year earlier. Today's occupancy approaches the 96.4 percent record high achieved nearly two decades ago in late 2000.
"Tight occupancy results from unusually strong apartment demand in recent months," said RealPage Chief Economist Greg Willett. "Apartment leasing activity accelerates during the warmer weather months, and demand was especially strong in this year's core period of product demand. New household formation continues, and rentals are capturing a sizable share of the resulting housing demand. At the same time, loss of existing renters to home purchase remains limited relative to historical levels."
Renter demand boosted the number of occupied apartments by 118,000 units in the third quarter, an absorption pace nearly 25 percent above the average third-quarter demand for the past five years, Willett said.
ApartmentList.com said year-over-year rent growth currently equals 1.4 percent. "[That is] slightly ahead of the rate from this time last year, but still lagging the growth rates we observed from 2014 through 2017," said ApartmentList Housing Economist Chris Salviati.
Salviati noted tracking rent growth at the national level provides valuable context, "but housing markets are inherently local, and in contrast to the modest growth of our national rent index, some parts of the country are experiencing much more rapid price increases," he said.
Mesa, Ariz., near Phoenix topped ApartmentList's list for the nation's fastest rent growth with a 4.4 percent increase over the last year, more than three times the national rate. Phoenix ranked fourth on the list at 3.8 percent.
The Las Vegas area is also experiencing rent growth well above the national average. Henderson, Nev., has the nation's second-fastest rate of rent growth at 4.2 percent, while neighboring Las Vegas ranks third at 3.8 percent growth. "The Las Vegas metro has seen rapid job growth in recent years, but many of those jobs are in low-paying service and tourism industries, and continued rent hikes could lead to affordability concerns," Salviati said.
Apartment sector construction remains at three-decade highs, Willett said. Market-rate apartment properties under construction contain nearly 538,000 units that will be finished during roughly the next 18 months.
"While the apartment sector's performance has been terrific of late, the amount of product under construction does point to some near-term risk," Willett said. "If economic growth slows, it will be tough to sustain rent growth for luxury units at today's level, when so much top-tier product is conducting initial leasing."