(September 29, 2010)—Occupancy rates and effective rents in U.S. apartments continued to climb sharply during the 3rd quarter, according to information just released by MPF Research (www.mpfresearch.com), a division of RealPage (www.realpage.com).
Preliminary results from the firm’s 3rd quarter survey show that national apartment occupancy now is up to 93.9 percent. The performance improved by 0.5 percentage points during the 3rd quarter, and occupancy has firmed by 2.1 points since bottoming at the end of 2009.
Effective rents have increased by 1.2 percent since the middle of 2010. Year-to-date rent growth is at 2.6 percent.
The apartment sector’s occupancy and rent upturns reflect that demand is surging at the same time that deliveries are slowing. Demand for 68,000 units was posted in the July-September time frame, the MPF Research analysis says. Absorption in 2010 through the 3rd quarter totaled 283,000 units, one of the most robust tallies recorded during the past two decades. Apartment stock additions during the 3rd quarter were limited to about 12,000 units, and new supply finished during the initial nine months of the year was held to approximately 48,000 units.
“While sluggish employment growth has triggered only mild new household formation, apartments are capturing a disproportionately large share of total housing demand,” said Greg Willett, MPF Research’s vice president of research and analysis. “That pattern is likely to be sustained for a while, in part because current mortgage qualifications standards have made it tougher to buy a home. Expansion of the country’s population of young adults, who tend to favor renting over ownership, also is working in the apartment sector’s favor.”
Apartment rent growth during recent months has been strong enough to get pricing changes into positive territory on an annual basis across three-fourths of the 64 metros that form the core of MPF Research’s national coverage. Most remaining markets have seen rents stabilize.
The nation’s strongest rent growth during the past year has occurred in El Paso, where rates are up 11.7 percent. Quite a few additional markets register year-over-year pricing increases in the range of 4 percent to 5 percent, with the list including Albuquerque, Baltimore, Miami, New York, Pittsburgh, San Jose, Washington, DC and West Palm Beach.
On the flip side, Las Vegas is the one spot still suffering a notable decline, with rents as of September off 6.3 percent from year-earlier pricing. Dips near 1 percent remain in place across Atlanta, Houston, Phoenix, Salt Lake City, Seattle and Tampa.
Look for the apartment sector to finish 2010 on a strong note, according to MPF Research. “While occupancy has a tendency to backtrack a little during 4th quarter, that’s in large part because seasonally slow leasing activity doesn’t keep pace with completions,” Willett said. “But this year, with only a handful of units coming online during the 4th quarter, occupancy is more likely to hold up, in turn allowing rents to continue to rise.”
For more analysis, please view the latest video edition of Apartment Market Dynamics.
About MPF Research
A member of the RealPage family, MPF Research provides market information and objective insights to the multifamily industry. The market intelligence offered by MPF Research is used in formulating and fine tuning business strategies in a variety of multifamily industry specialties, including investment, operations and development. For more information on MPF Research, call 877-284-4938 or visit www.mpfresearch.com.
Located in Carrollton, Texas, a suburb of Dallas, RealPage provides on-demand (also referred to as “Software-as-a-Service” or “SaaS”) products and services to apartment communities and single family rentals across the United States. Its six on-demand product lines include OneSite© property management systems that automate the leasing, renting, management, and accounting of conventional, affordable, tax credit, student living, and military housing properties; CrossFire© sales and marketing systems that boost occupancy and build retention; YieldStar© asset optimization systems that increase asset valuation and investment return; Velocity™ billing and utility management services that increase collections and reduce delinquencies; LeasingDesk© risk mitigation systems that reduce a community’s exposure to risk and liability; and OpsTechnology™ spend management systems that help owners manage and reduce operating expenses. Supporting this family of SaaS products is a suite of shared cloud services including electronic payments, document management, decision support and learning. Through its Propertyware subsidiary, RealPage also provides software and services to single-family rentals and low density, centrally-managed multifamily housing. For more information, call 1-87-REALPAGE or visit www.realpage.com.