Surging demand and strong occupancy in the nation’s apartment market is “surprising” experts who say the continued strength is “unexpected.”
Just a year ago, as dozens of cranes swarmed over major U.S. cities, there was concern that the rental apartment market was overheated and overbuilt.
Apartment absorption, which is the rate at which new units are rented out, is now at the highest level in three years, according to the U.S. Census. Apartment construction took off in 2012 and reached a 20-year high in 2017. It remained elevated this year, despite warnings that demand would slow as more millennials aged into their homebuying years.
And while buyer demand did surge, sales were thwarted by tight supply that has pushed prices higher in the past few years, weakening affordability. When mortgage rates surged this year, even fewer people were left with the means to buy a home.
“People underestimate how far away from homeownership a lot of renters across the country, even in luxury apartment buildings, are,” said John Pawlowski, residential sector head at Green Street Advisors. “The demand has been better than expected. It’s been a stickier tenant base and pricing power at that tenant base, again in the face of elevated supply, has simply surprised us.”
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