We thought you might want to see some of our findings on the national rental market as the summer comes to a conclusion. To stay updated on the current market, CORT continually scours several sources for rental market intelligence and stays in contact with property managers throughout the country. We also gain great insight into markets via our ApartmentSearch.com website.
One of the big drivers of overall trends is the record number of new rental units coming on the market in 2014. Nearly 240,000 new units will come online, the most in the past 20 years. The multi-family construction that dragged for a few years after the market “correction” appears to be catching up to the demand. What is most interesting is that 42% of the projected new rental units will be in only 10 metropolitan areas – and Texas is the biggest volume state: Dallas, Austin, Houston, Washington D.C., Denver, New York, Seattle, Atlanta, Los Angeles and Orlando.
Vacancy looks to be up from 4% to 5% by year-end, in great part to the additional units available to rent. Rents are forecasted to continue their rise, but at slower pace than the past few years. The 3% increase that was common in 2013 should abate somewhat. However, there will still be cities where demand puts pressure on prices so make sure to consult your local listings as well as CORT.
Among young adults, there is still a backlog of demand in rentals. This is in part due to the large number of adults in their 20s and 30s, also referred to as millennials, who are living at home. And millennials are not forming households at rates typical in prior periods. Between the 3.3 million not forming households and the 1.6 million coming of age, there should be a demand from 5 million rental households in four years time, according to Marcus & Millichap.
According to the Harvard Joint Center on Housing, first time home buyers used to represent 40% of home purchasers while today that number is at 26%. Young people are also putting off marriage until later so we should eventually feel the effects of this demand in the next few years. The question, however, is whether the new construction will keep up with the influx of renters to hold back prices.
One surprising finding of our research is the actions of boomers in housing preferences. More and more adults are opting to make the switch from owning to renting. Builders of new rental units have recognized this trend in the quality of new and renovated apartments, which has been seen through the amenities provided in buildings such as granite counter tops. Turns out they are not so different than what is desired by millennials. Maybe they are trying to relive their youth with better digs!