1. Soaring rent growth.
The last quarter of 2021 recorded 9.9% year-over-year rent growth for the U.S. The states that recorded the highest annual rent growth were primarily Sun Belt states including Florida, Arizona, Nevada, Georgia and Utah.
2. Historical demand for apartments.
Demand for rental housing reached historical levels throughout 2021, which drove rent growth. The increased demand was a sign of healthy job growth and robust household formation taking place throughout the country.
3. Population growth.
The total number of U.S. households grew by 1.48 million in 2021 alone, according to the Census Bureau. Florida, Texas and Arizona had the largest net domestic migration gains in 2021 with increases of 220,890; 170,307; and 93,026, respectively.
4. Home prices at record highs.
The housing market became incredibly competitive during the pandemic as the median home sale price rose 14.6% in 2021, reaching record highs. As a result, the share of first-time homebuyers fell to an eight-year low. More people opted to rent for a longer period than they would in previous years because of the lack of affordable for-sale homes.
5. Supply shortage across the apartment industry.
During Q4 2021, there was a drastic 28.0% decline in completions of multifamily units compared to the previous year. Pandemic-related supply chain disruptions combined with shortages of both workers and materials have resulted in widespread construction delays in the apartment industry.
6. Wages are also growing.
The uptick in rent prices was accompanied by growing wages across all industries. Hourly wages soared approximately 5.2% year-over-year as of Q4 2021. All states except Connecticut and the District of Columbia experienced some type of wage growth compared to
Q4 2020. Kentucky, Texas, Vermont, Oregon and North Carolina lead the nation for the highest growth in hourly wages.
7. Labor market shortages.
States with high wage growth like Kentucky were challenged with a slow-to-return labor force. As the talent pool continued to shrink, employers competed more aggressively for available talent to fill openings by offering higher wages.
8. Minimum wage policy changes.
Minimum wage increases were widespread in 2021. It was estimated that 24 states and 50 municipalities would implement a raise to their minimum wage in 2021. Consequently, the average wage of restaurant and supermarket employees rose above $15 an hour for the first time.
9. Relocation trends.
Population growth increased in states where both rents and wages trended upward concurrently. A thriving job market and higher wages attracted a significant flow of new residents in Florida and Texas.
10. Apartment affordability.
The National Apartment Association (NAA) projects that annual rent growth will continue rising during 2022 but at a moderate pace of 6.3% to 7.0%. Labor market shortages will persist during 2022 and a slowdown in wage growth is not likely as the unemployment rate is expected to return to pre-pandemic levels by 2023. NAA will be releasing research tracking apartment affordability by market each quarter, which will be available at naahq.org.
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For more info on the article, contact Rahimat Emozozo at [email protected]