News & Research Listing

Apartment Market Pulse
Summer 2020: Weathering the Storm Amid Uncertainty

U.S. Apartment Market

During the second quarter, the COVID-19 pandemic significantly impacted key apartment fundamentals as a result of stay-at-home orders and historical unemployment rates. Nonetheless, despite rapid changes to the multifamily housing sector, the downturn is expected to be short-term and offset by pent-up demand.

Occupancy rates fell to the lowest level since Q2 2017. U.S multifamily occupancy posted a decrease of 0.6 percentage points year-over-year to 95.3 percent, as reported by RealPage. Although vacancies increased because of job losses, resident retention has climbed to historically high levels. Many residents are choosing to shelter in place and renew in their current apartments. According to CoStar Group, among markets with 100,000 or more units, New York City, Sacramento, Northern New Jersey, Inland Empire and San Diego posted the highest occupancy rates.

U.S effective rent averaged $1,415, up by 1.0 percent annually but trailing the first quarter of 2020 by 1.0 percent, the first quarterly decline since 2010. Lower-priced suburban markets with limited new supply led the nation in rent growth. Given that remote work grants the flexibility to relocate, many renters are choosing affordability and more space over proximity to the office. As reported by CoStar Group, Inland Empire, Sacramento, Phoenix, Norfolk and Columbus ranked highest in rent growth.

On an annualized basis, nearly 303,700 units came online during the second quarter, far outpacing demand. Apartment demand was significantly subdued; only 177,007 units were absorbed, the lowest level since Q3 2013. As the country shifts to reopening the economy, pent-up demand for apartments is likely to absorb new inventory. Dallas, Washington, D.C., Houston, Atlanta and Denver were the nation’s leaders for apartment demand.

New construction for apartment buildings battled interruptions brought on by the COVID-19 pandemic. Multifamily permitting totaled 368,000 units (seasonally adjusted annual rate) in June, declining by 15.2 percent since the same time last year, according to estimates by the U.S. Census Bureau. New York City, Seattle, Dallas, Houston and Austin were the top-ranking markets for multifamily building permits issued. Construction starts for apartments recovered in June after facing challenges in April and May. Apartment construction starts reached 350,000 units, down by 2.5 percent annually. The number of multifamily units under construction fell 4.8 percent to 654,000 units.

U.S. Capital Markets

Investment activity in the apartment market was quiet during the second quarter as investors are choosing to take a wait-and-see approach. U.S. real estate deal activity has slowed across all property types; however, apartments remain the preferred asset. According to Real Capital Analytics, closed apartment sales transactions during Q2 2020 totaled $11.3 billion, falling to the lowest levels in a decade. Despite the pause in deal velocity, the average price per unit sold stood at $176,452, an annual growth of 6.5 percent. Investors traded more than 70,900 units, with cap rates averaging 5.3 percent, down 25 basis points compared to Q2 2019.

All major metros tracked by Real Capital Analytics posted a decline in sales volume. The largest decline in year-over-year quarterly sales occurred in Los Angeles, Houston and Seattle; each metro saw a drop in volume by over 80.0 percent. On the converse, deal activity in Denver and San Francisco experienced the least amount of interruption.

REIT and private capital was down marginally during the second quarter, declining by 2.9 and 2.0 percentage points, respectively, compared to 2019. Cross-border acquisitions of U.S. apartments increased by 2.6 percentage points, led by Canada and South Korea.

U.S. Economy

After experiencing its largest decline in history in April (20.8 million jobs), employment regained some ground in May and June, adding 2.7 and 4.8 million jobs, respectively. The leisure/hospitality, retail and education/health sectors were the big winners in June as restaurants, bars, shops and doctors’ offices opened and/or expanded their services. The Bureau of Labor Statistics’ Establishment Survey was based on the payroll period which included June 12, so the effects of the end-of-month surge of COVID-19 cases in states such as Florida, Texas, Arizona and California were not reflected in June’s job report.

The closely watched weekly unemployment claims report painted a more troubling picture as it remained elevated at more than double the pre-pandemic level week after week. By July 4, initial claims for unemployment registered in the 1.4 to 1.5 million-range for four consecutive weeks. Claims for the Pandemic Unemployment Assistance Program, which covers workers not eligible for traditional unemployment insurance benefits, have been trending upwards since mid-June, totaling 1 million for the week ending July 4.

Personal income jumped 10.8 percent in April, thanks to stimulus checks and additional unemployment insurance provided for in the Coronavirus Aid, Relief, and Economic Security Act (CARES), before falling 4.2 percent in May. Still, on a per-capita basis, personal income remained 5.2 percent above pre-pandemic levels as the fiscal stimulus initiatives continued to make many workers more than whole.

In the face of uncertainty and an economy that may continue to struggle, consumers set aside money to cover potential financial hardships. The personal savings rate, which averaged 7-8 percent during the past several years, soared to 33 percent in April, the highest level since the data series began in 1959. It has since dropped to 23.2 percent in May as consumers began making purchases again, but remained elevated.

Forecasts for Q2 Gross Domestic Product (GDP) from selected sources range from a high of -14.3 percent annualized by the New York Federal Reserve Bank to -38.9 percent by The Conference Board, whose baseline forecast scenario is a Double-Dip Recession with unemployment rates staying above 9 percent through 2021. Moody’s Analytics is forecasting a 33.2 percent decline in GDP with unemployment rates falling under 9 percent by the end of 2021. The persistently wide ranges in forecasts highlight the uncertainty of a second wave of the novel coronavirus and the timing in which it might occur.


With COVID-19 cases higher in some states than they were in April and May—originally anticipated to be the peak—the pandemic is far from contained in the United States. Until consumers and businesses alike hear some good news about containment, treatments and vaccines, fits and starts can be expected to plague economic activity.

Between consumers’ savings and additional income, it should come as no surprise that rent collections being reported by several property management firms for institutional-grade properties remained strong through July. But the combination of dwindling savings and the supplemental federal unemployment insurance expiring at the end of July bodes poorly for rent collections in September and beyond.

August 7, 2020
Apartment Market Pulse
Spring 2020: The End of the Recovery Begins

U.S. Apartment Market

The U.S. multifamily market remained on its course of modest growth in Q1, with favorable vacancy rates and rent growth. The effects of COVID-19 were not yet reflected in the data, however the pandemic’s impact on apartment fundamentals are anticipated to show in Q2 2020.

The apartment sector continued to indicate stability as occupancy rates averaged 95.5 percent during the first quarter, up by 0.7 percentage points since Q1 2019, as reported by RealPage. Markets that saw the greatest decrease in vacancy year-over-year included Dayton, Pittsburgh, Wichita, Nashville, and St. Louis, according to REIS. Nashville was among the top metros for largest over-the-year percentage growth in employment, up 8.2 percent based on data released by the Bureau of Labor Statistics. Greenville, Columbia, Fort Lauderdale, Charlotte, and Greensboro posted the leading increases in vacancy.

The national effective rent averaged $1,427, increasing 0.7 percent since the previous quarter and 4.0 percent since Q1 2019. Phoenix, Lexington, Greenville, and Oakland-East Bay led the U.S in asking and effective rent growth year-over-year.

The multifamily sector added 263,209 units to the market in Q1, the highest level of deliveries during the first quarter since Q1 2018. Interruptions due to COVID-19 are expected to cause many multifamily construction projects to pause due to shortage of labor and supplies as well as government intervention in some areas. As demand for apartments stood strong, the market absorbed 284,025 units, making it the ninth consecutive quarter that absorption outpaced deliveries. Demand could slow during this year’s leasing season due to rising unemployment rates and shelter-in-place orders.

The seasonally adjusted annual rate for multifamily building permits in March totaled 423,000 units, decreasing by 3.6 percent since March 2019, according to estimates by Census. The top-ranking markets for number of permits issued in March included Houston (2,638), New York City (2,087), Los Angeles (1,752), Dallas (1,582), and Portland (1,374). The number of multifamily units under construction rose 14.5 percent year-over-year to 672,000 units. The outbreak of COVID-19 is expected to delay apartment construction due to the lack of government employees who play a critical role in construction projects by issuing permits and conducting inspections. 

U.S. Capital Markets

According to Real Capital Analytics, closed transactions apartment sales during Q1 2020 totaled $30.6 billion, decreasing by 19.5 percent year-over-year. Despite uncertainties surrounding the pandemic and the “wait-and-see” approach, deals are still occurring, only at reduced levels.  

The U.S average price per unit stood at $184,709, an annual growth of 12.4 percent. Investors exchanged more than 180,000 units, with cap rates averaging 5.5 percent, down 11 basis points annually.

Washington, DC had the top increase in sales volume, up 20.5 percent year-over-year.  Among the major markets, New York was the only market that experienced a decline in sales volume, down 21.4 percent. In response to recent New York City rent regulations set in place in late 2019, many investors are apprehensive to invest in regulated properties and are concerned about loss of income and the inability to recoup costs of capital improvements.

The private real estate investment company, Aragon Holdings, ranked first for top seller, exchanging 39 properties totaling over $1.8 billion during Q1. Other companies that sold off properties during the first quarter included Cortland, Steadfast Income REIT, Western Rim Properties, and Invesco Real Estate.

Apartment development companies with projects valued over $1.0 billion during the first quarter included Greystar and Hines. Other top developers included Lennar, USAA Real Estate, and Related Companies.

U.S. Economy

Of all the economic predictions over the last 12-18 months, one aspect came to fruition during the first quarter of 2020: the longest recovery in U.S. history did not die of old age. Not only did we not have to wait for unemployment rate figures to stay elevated or for Gross Domestic Product (GDP) to turn negative or for a sustained, inverted yield curve, but the U.S. economy was plunged into recession seemingly overnight. As Covid-19 began to spread across the country, government calls for social distancing, stay-at-home orders and the shutdown of non-essential businesses brought the economy to a halt.

The impacts were swift in the hospitality, airline and retail industries as travel restrictions were imposed, conferences and meetings were canceled and customer-facing businesses closed, although all industry sectors have been touched by the pandemic.

As March melded into April, economic data worsened and visuals of all indicators began to resemble a cliff, breaking decades-old historical records in most cases. A record 20.5 million jobs were lost in April alone and the unemployment rate experienced its largest monthly increase ever, climbing 10.3 percentage points to 14.7 percent. It is important to remember that in order to be counted as unemployed, a person needs to be actively seeking employment, something that is challenging at best due to stay-at-home orders and impossible at worst due to business closures. The U6 unemployment rate measures all unemployed people plus those marginally attached to the labor force (not actively seeking work now) plus those employed part-time for economic reasons. The U6 unemployment rate ballooned to 22.8 percent in April, another record. For context, the highest level of this measure of unemployment during the Great Recession was 17.2 percent.

First-quarter GDP, which had been on track for growth in the 2.0 percent range, declined 4.8 percent, a testament to the destructive final two weeks of the quarter. All components witnessed declines with consumer spending registering the largest contraction at 5.3 percent. Second-quarter projections are bleak with general consensus in the -30 percent range.

Forecasts for the recovery—its onset, its duration and its shape—vary widely due to the unprecedented nature of the downturn and the fact that a recovery is dependent on containing the virus so consumers get back to spending and businesses begin to invest again. Testing and tracing until a vaccine is readily available will be key to boosting both consumer and business confidence and avoiding a second shutdown. 


CBRE Econometric Advisors is forecasting four quarters of negative rent growth with a 6.7 percent decline from peak to trough and rents returning to their pre-pandemic levels by Q2 2022. RCLCO predicts the downturn for multifamily will most closely follow the last recession with 5 quarters of negative rent growth and a 6.5 percent decrease in rents.

Unsurprising, April rent collections were near normal as layoffs and furloughs began during the latter part of March, meaning some employees received their final paychecks just before rent was due. The subsequent arrival of stimulus and unemployment payments kept collections on track throughout the month, according to several property management software firms tracking the data. Through the first week of May, collections were stronger than expected although these data only track larger, institutional properties. For millions of small rental housing providers, the future is less certain. 

May 14, 2020
Apartment Market Pulse
Winter 2020: Apartment Market Pulse

U.S. Apartment Market

Looking back at 2019, the apartment market wrapped up a historically strong year on numerous fronts, including rent growth, absorption and occupancy rates.

Apartment fundamentals seasonally subsided during Q4 2019, yet levels remained healthy. Occupancy inched up 0.8 percent annually to 95.8 percent, according to RealPage. St. Louis had the greatest year-over-year change in occupancy, up by 140 basis points. The unemployment rate for St. Louis was 3.0 percent as of November, as reported by the Bureau of Labor Statistics. Employment in mining, logging, and construction had the largest annual increase by nearly 8.0 percent.  

Annual absorption of 249,721 units outpaced 246,779 completions. The apartment sector continued to demonstrate the ability to absorb new supply, not only keeping up with high levels of construction, but surpassing them for two consecutive years. In 2019 markets with the highest completions included Dallas (22,688), New York (10,385), Seattle (8,754), Washington DC (8,544), and Denver (8,087).

With tight occupancy and absorption consistently high asking and effective rent averaged $1,498 and $1,426, respectively, as reported by Reis. Annual rent growth averaged 3.7 and 3.8 percent but was the lowest growth rate in more than two years. Secondary markets including Knoxville, Phoenix, and Raleigh led the U.S. in annual effective rent growth, all surpassing 6 percent increases. Charleston, Chattanooga, Tucson, Pittsburgh and Phoenix ranked as leaders in rent growth since the previous quarter. On the opposite side of the spectrum, San Jose, Northern New Jersey, Richmond, New Haven, and Fairfield County saw a decline in rent growth.

U.S. Capital Markets

Fourth quarter dollar volume of apartment property sales decreased 25.0 percent year-over-year totaling $36.6 billion, according to preliminary data from Real Capital Analytics. The average price per unit was $209,368, an annual growth of 24.1 percent. Investors traded more than 200,000 units, with cap rates averaging 5.3 percent, down 33 basis points annually.

Sales volume in Seattle secured the largest year-over-year increase among major markets, up 55.2 percent totaling $7.5 billion in closed apartment sales. According to CoStar, record sales volume occurred during the middle of Q4 2019 for Seattle as investors were motivated to close on deals due to a recent change to the statewide real estate excise tax. Starting January 2020, taxes on properties trading for more than $1.5 million will increase. Washington DC, Atlanta, Phoenix, and San Francisco were among the other major markets which experienced sales volume growth since Q4 2018. New York City, Los Angeles, Dallas, Houston, and Denver all posted a decline in sales volume.

Mid- and high-rise properties received strong interest from investors; sales volume increased by 2.8 percent while garden-style property sales dropped 4.4 percent. REIT investments surged by 121.7 percent while cross-border and institutional investments fell by 6.0 and 14.2 percent, respectively. 

U.S. Economy

The U.S. Economy ended the year with solid, if not exceptional, fundamentals. Monthly job gains averaged 176,000 jobs, down from the 2018 level but in line with a 50-year low unemployment rate. The fourth quarter advance estimate for real Gross Domestic Product (GDP) increased 2.1 percent, bringing the 2019 total to 2.3 percent.  While this level of growth was anticipated, it was disappointing compared to the 2.9 percent growth rate of 2018 and growth that topped three percent during the first three months of 2019.

Consumers continued to lift the economy with optimism and consequent spending. In 2019, consumers were responsible for over 76 percent of GDP growth. Business investment, on the other hand, contributed just 14 percent to economic growth and actually decreased for the past three quarters. Uncertainties surrounding the trade wars were largely responsible for businesses putting the brakes on spending. The mid-January trade agreement between the United States and China should go a long way in helping to alleviate some of those concerns, but with a 2020 Presidential election on the horizon, the coronavirus all but shutting down China and the global economy on shaky ground, any revived optimism may well be short-lived.

Although overall average wage growth has been relatively stable, breaking down wages by quartiles reveals stronger growth for the lowest-income earners.  According to the Federal Reserve Bank of Atlanta’s Wage Growth Tracker, which uses micro-data from the Current Population Survey, the bottom quartile of wage earners experienced growth in excess of 4 percent for the past 17 months.

Retail sales were another strong indicator at the end of the year, growing 5.8 percent year-over-year in December, as reported by the Census Bureau. The results suggested a stronger holiday season than was anticipated and was a stark contrast to the paltry 1.5 percent growth at the close of 2018. 


Recession fears have quelled somewhat between an economy that continues to grow and the truce in the trade war. With the run up in financial markets also contributing to optimism, most economists have pushed predictions for the onset of a recession to late 2020 or fully into 2021.

After floundering in the 64 to 65 percent range for eight quarters, the homeownership rate increased to over 65 percent during the fourth quarter, the highest level in six years. Despite this uptick, the apartment market is expected to sustain strong demand in 2020.  Single-family construction is projected to rise, but the supply of existing single-family homes, typically more affordable to first-time home-buyers, remains tight. Demand from young adults living with their parents, spurred by a healthy job market and rising wages, should help fuel new rental household formations.

On the supply side, permits for properties with 5 or more units ended the year at a seasonally adjusted annual rate of 474,400, the highest level since 1986.  Although downward pressure on occupancy rates can be expected with an influx of new apartments, persistent construction delays, due to increased costs and labor constraints, will help demand keep a relatively steady pace with new supply.

March 17, 2020
Apartment Market Pulse
Fall 2019: Demand Fuels Occupancy Growth

U.S. Apartment Market

Strong apartment demand continued to be powered by job growth, demographic trends, and economic shifts. According to RealPage, occupancy during the third quarter climbed to 96.3 percent, almost reaching the all-time high of 96.4 in late 2000. Occupancy increased by at least 100 basis points in the past year in Greensboro, Cincinnati, St. Louis and Virginia Beach.

Following a record-breaking absorption rate of 155,515 units in Q2 2019, move-ins returned to more normal rates of 118,000.

Effective rental rates rose to $1,416, a three percent increase year-over-year as a result of tight occupancy. Secondary markets led the nation in rent growth, specifically in the Southeast region. Phoenix and Las Vegas remained anchored as leaders in rent growth followed by Greensboro, Raleigh, and Nashville.

The seasonally adjusted annual rate for apartment permits climbed to 509,000 units in August. Permits for apartments have only surpassed 500,000 four times since 2008, the most recent being March 2018, according to Census. Apartment permits have increased by 27.3 percent year-over-year. Construction starts for apartments were 424,000 units in August, an annual increase of 13.7 percent. Completions also increased by 17.4 percent, totaling 338,000 units. The top five markets for apartment construction permits in August were New York, Dallas, Houston, Los Angeles, and Miami. 

U.S. Capital Market

Apartment deal activity was mediocre during the third quarter, indicating anxiety amongst investors. The decline in sales has no relation to demand but rather speculation about an imminent recession. Closed apartment transactions totaled nearly $42.3 billion this quarter, as reported by Real Capital Analytics, a downturn of 8.6 percent year-over-year. Owners and Investors exchanged 280,557 units, declining by 8.7 percent. Average price per unit was $175,255 a 6.3 percent increase from Q2 2018. The average cap rate was 5.5 percent, down by 4 basis points. Individual assets were the preferred deals among investors increasing by 1.8 percent. Portfolio sales volume declined significantly by 39.3 percent.

U.S. Economy

The October economic outlook from the National Association for Business Economics revealed more pessimism than the June survey. Not only were 2019 GDP forecasts revised downwards to 2.2 percent from 2.4 percent, but the 2020 forecast slipped to 1.8 percent, which would be the lowest rate of growth since 2016. Four out of five forecasters weighted risks to the downside with trade policy as the key culprit. The question of an upcoming recession tempered the pessimism with survey respondents rating the odds of a recession over the next 12 months as relatively low but picking up in late 2020. Respondents put the odds of a recession starting by the end of 2020 at 47 percent and increasing to 69 percent by mid-2021.

Strengths in the economy were once again demonstrated through labor market indicators as the unemployment rate reached a new 50-year low of 3.5 percent. Job gains moderated to 136,000 in September, but upward revisions to July and August figures kept the third quarter average at a fairly healthy 157,000 new jobs per month.

Detroit was the only metro area that experienced job losses on a year-over-year basis while 50 other major metros posted gains. Southern and Western cities have dominated over the past year with Orlando growing by 4 percent and Dallas and Seattle each topping 3 percent. A longer-term view of the job market, comparing 10-year and 5-year growth rates, shows labor market momentum picking up in Memphis, Philadelphia and St. Louis. Metro areas experiencing slowing job growth in the past 5 years included Houston, New Orleans and Oklahoma City.  

Hourly earnings posted disappointing results with wages rising just 2.9 percent year-over-year in September after a 13-month run exceeding 3.0 percent, puzzling economists given the decades-low unemployment rate. Theories range from higher-paid Baby Boomers leaving the workforce to a proliferation of lower-paying jobs to inconsistent measurements in the unemployment rate itself. Still, many analysts believe wage pressures will eventually arrive amid persistently low levels of joblessness.


Recently released data from the Census Bureau points to continued strength in the rental housing market. According to American Community Survey 1-year estimates, the number of renter households in apartment properties grew by 690,000 in 2018 after a year of contraction in 2017. The strongest household growth occurred in properties containing 50 or more units. It’s worth noting that different Census surveys can produce a wide variance in results, but the Housing Vacancy Survey also backs up a growing number of rental households of all types in 2018 and into 2019. 

In addition to household estimates, Census also released median household incomes, which measure all sources of income within a single household. National figures remained essentially flat in 2018. Income growth in renter-occupied housing, however, swelled by 6.1 percent, coming off lackluster growth of just one percent in 2017.

Strong demographic and economic fundamentals on the demand side coupled with interest rates that are trending lower on the capital markets side paint a steady growth outlook for the apartment industry in 2020.

March 17, 2020
Apartment Market Pulse
Fundamentals Ramp Up Summer 2019

Consistently low-interest rates will keep commercial real estate investors active in the market, if not at record levels, as buyer and seller pricing expectations remain mismatched in many segments of the marketplace.

U.S. Apartment Market

During the second quarter, key indicators showed the apartment sector continued to have a strong command of the housing market. Demand displayed robust figures with more than 170,000 units absorbed, a five-year high. As a result of a busy leasing season, national occupancy soared to 95.9 percent, the highest rate since 2001, according to RealPage. Apartment demand was the highest in Dallas, Chicago, and Houston.

Demand also impacted effective rental rates which climbed to $1,393, a three percent increase year-over-year. Las Vegas and Phoenix both saw rent growth of more than eight percent. In 2018 the U.S. Census Bureau ranked both markets among the top 10 for new resident growth. The majority of the other top rent performers were marketed in the Southern region.

Rental Rates vs. Occupancy Rates

U.S apartment construction totaled 73,956 units this quarter, far outpaced by demand. Apartment starts in June numbered more than 396,000 units, an annual increase of 25.3 percent according to the U.S. Census Bureau. Permits declined 13.3 percent to 360,000, indicating a balance in the market given the high level of recent completions. Houston, Minneapolis, Orlando, and Washington, DC all saw an increase in multifamily permits from last year.

Apartment Demand vs. Completions

U.S. Capital Markets

According to Real Capital Analytics, closed transactions totaled over $37 billion this quarter, increasing 1.5 percent year-over-year. More than 230,000 units changed hands, a decline of 9.4 percent. Average price per unit was $171,406 an 11.9 percent increase from Q2 2018. Markets which experienced the greatest dollar volume growth included Washington, D.C., San Francisco and Denver. Investors in the D.C. region are betting on Amazon driving demand. Three of the top five sales, on a price per unit basis, were located less than 5 miles from the new headquarters.

US Apartment Capital Trends

U.S. Economy

The word “uncertainty” has crept back into national economic discussions in full force despite healthy labor markets and economic growth topping three percent in the first quarter. The reasons for caution have not shifted materially, however, over the past several months: trade war concerns, slower global growth and the wind-down of impacts from the Tax Cuts and Jobs Act.

Uncertainty, particularly over the trade wars appears to be the cause of some weakening economic indicators. Business investment has been largely flat over the past several quarters. A drop in consumer confidence, as reported by the Conference Board in June, will bear watching to see if it is the start of a longer-term trend. Consumer spending also flatlined late last year but may be showing signs of a reversal according to the latest monthly data.

Federal Reserve rate cuts are also back on the table. It was little more than six months ago that the Fed was calling for several more rate hikes in 2019 and 2020. The starkest adjustment to the Fed’s recently released quarterly forecast was the lowering of the Fed funds rate projection for 2020 to 2.1 percent from 2.6 percent, a considerable drop from the 2019 forecast of 2.4 percent. Consistently low-interest rates will keep commercial real estate investors active in the market, if not at record levels, as buyer and seller pricing expectations remain mismatched in many segments of the marketplace.

Business Investment

Job growth has been relatively healthy given the tightness of the labor market, averaging just over 170,000 jobs per month during Q2 2019, on par with the first three months of the year and in-line with 2016 and 2017 figures. Nearly one-third of the nation’s largest metro areas recorded unemployment rates below three percent in May. Year-to-date wage growth spiked in Denver and Nashville at 7.2 and 6.4 percent, respectively. With the exception of Cleveland, wage growth in the cities with the highest unemployment rates were below the U.S. average of 3.1 percent.

Unemployment Rates


Apartment market fundamentals have been strong thus far in 2019. Third-party data providers are mostly in agreement that several indicators are hitting levels not reached in years including leasing, absorption and rent levels for workforce housing. Vacancy rates have been decreasing in some markets amid new construction. Mortgage rates are on the decline again, but lack of supply along with affordability issues have kept homeownership rates fairly steady for the past few quarters. Marcus & Millichap’s most recent calculation of the premium of owning over renting was $248 per month, a compelling case for sustained apartment demand.

August 1, 2019
Apartment Market Pulse Q2
Apartment Market Pulse
Spring 2019: Rental Growth Remains Steady

U.S. Apartment Market

Rent growth across the United States remained strong during the first quarter even amid increasing home sales. Reis reported annual rent growth of 4.2 percent. No markets experienced declines in rent and many had significant growth. Of the 79 markets tracked by Reis, 14 markets saw rent growth of 5 percent or more. 

According to RealPage, the increase in rent growth performance was a result of steady occupancy which has been above 95 percent for the past five quarters. Rent increases grew the highest in secondary and tertiary markets where rental rates are low enough with a larger threshold for rent increases yet remain reasonably priced to renters. 

Las Vegas and Phoenix take precedence at 7.7 percent and 7.5 percent annual effective rent growth, respectively, well ahead of all other large markets. Charlotte followed behind, ranked third with a price increase of 6.5 percent. RealPage reported soaring development in Charlotte during the past nine years, increasing its apartment stock by 35.5 percent. It’s expected to grow another 4.1 percent during 2019, taking the top spot for inventory expansion. Charlotte’s growth can be attributed to its solid STEM workforce as well as favorable costs of living and doing business. Markets ranking at the end of the spectrum included Syracuse, Tulsa, New Haven and Lexington, each with less than 2 percent rent growth. 

Completions totaled 33,276 units while net absorption yielded 37,159 units as reported by Reis. This quarter produced significantly lower completions and absorption. This was due in part to continued labor shortages within construction as well as increasing construction costs and other barriers. Despite 2019’s crawling start, this year is expected to deliver more units than 2018 with a projection of 336,400 new apartment homes.

U.S. Capital Markets

U.S. apartment property closed-sales in Q1 2019 totaled $34.4 billion, a year-over-year decline of 5 percent, according to preliminary data from Real Capital Analytics. Bumpy interest rates reflected a slightly more cautious investor sentiment. Investors exchanged 225,908 units, a decrease of 13.1 percent since last year. The average price per unit sold was $163,519. Nationally, cap rates decreased 56 basis points year-over-year to 5.1 percent. Foreign transaction volume in the U.S. apartment market increased by 2 percent from the year prior. Investors from Canada and Bahrain showed the highest sources for foreign capital at $3.6 million and $1.1 million, respectively. Portfolio transactions had a year-over-year increase in dollar volume of 31.3 percent, while individual property transactions dropped 12.7 percent.

Lone Star ranked first as the top seller within the quarter. The Dallas-based private equity firm sold a series of multifamily housing portfolios worth $3 billion in Virginia, Pennsylvania, New York and Massachusetts totaling 14,606 apartments. 

U.S. Economy

The first three months of the year brought signs of a slowing economy. Even though February’s jobs report was revised upward, it was still the worst monthly total (only 33,000 new jobs) since September 2017. Job additions topping 300,000 in January kept the quarterly average largely in line with 2016 and 2017 but off from last year’s levels. Job openings, which hit an all-time high of 7.6 million in November, have steadily declined to 7.1 million as of February. Regardless, openings far outnumbered the 6.2 million unemployed. The unemployment rate held steady in March at 3.8 percent.

Slower growth predictions came in from a variety of sources across the globe. The International Monetary Fund made headlines by adjusting its global 2019 GDP forecast downward, for the fourth time, to 3.3 percent from 3.9 percent last summer. Closer to home, The Federal Reserve revised its U.S. GDP forecast for 2019 to 2.1 percent, down from 2.3 percent at the end of last year, but a better performance than the future long-run projection of 1.9 percent. Moody’s Analytics also lowered its expectations for growth to 2.3 percent. Factors cited for lower expectations nationally included slower global growth, trade tensions and waning impacts of fiscal stimulus. Despite forecasts weighted toward downside risks, the consensus view remains a recession-free 2019.


A slower start to the year had been anticipated, and thus should not rattle investors or business owners much. The tight labor market means employers are having an increasingly difficult time finding the right workers, so the hiring process slows. The effect of the Tax Cuts and Jobs Act was forecast by both the private and public sectors as a positive hit to 2018 economic growth, dissipating in 2019 and beyond. 

Several positive factors at play will keep the apartment industry in steady, if not stellar, growth mode this year. Interest rates have stabilized, and the Fed has announced it will only raise rates one more time through the end of 2020. Increased costs of capital, a major concern for apartment property owners and operators a year ago, is not on the immediate horizon. And with few exceptions, apartment demand is keeping up nicely with new supply. With mortgage interest rates starting to decline again and housing inventory growing, we can expect more residents to transition to homeownership this year, but the lifestyle draws to apartments: community, amenities, convenience, and freedom will hold their attraction for many current and prospective residents. 



May 1, 2019
Rental Growth
Apartment Market Pulse
Winter 2019: Strong Fundamentals Close Out the Year

U.S. Apartment Market

The apartment market ended the year on solid territory, with absorption outpacing new supply and occupancy rates up 40 basis points in 2018, according to RealPage. At 3.3 percent, Q4 year-over-year rent growth was at its highest level in more than two years. Fewer apartments came online in 2018 versus 2017 and new supply has tempered during the past several quarters when measured against existing stock. However, the pipeline remains robust with more than 375,000 apartment homes under construction at the end of the year, above the quarterly average for this building cycle.

Quarterly New Supply

Of the 30 major metro areas tracked by Yardi Matrix, 24 experienced effective rent growth at or above the average 2018 inflation rate of 2.4 percent and none experienced declines. Rent growth in Las Vegas and Phoenix topped the charts, each exceeding 6 percent. Job growth in both cities was strong at 3.8 and 4.2 percent, respectively, well above the U.S. average of 1.7 percent through November. The U.S. Census Bureau recently reported that Nevada was one of the fastest-growing states; Arizona placed in the top five.

According to REIS, secondary and tertiary markets experienced the greatest vacancy rate declines in 2018. Birmingham, Ala.; Tulsa, Okla.; Buffalo, N.Y.; Greenville, S.C.; and Memphis witnessed vacancy rate decreases ranging from 160 to 70 basis points. While these markets can claim healthy job growth in 2018, employment in Tulsa and Buffalo grew by the highest rates during this recovery. A common thread in markets with the highest vacancy rate increases was the pace of new construction. This softness is largely anticipated to be temporary given solid population growth and strong economic fundamentals in many of these markets.

Top and Bottom 5 for Vacancy Changes

U.S. Capital Markets

After losing ground in 2017, the dollar volume of apartment property sales picked up again in 2018, increasing 9.3 percent year-over-year, according to preliminary data from Real Capital Analytics. Although fourth quarter volumes were down from last year, the average price per unit experienced its largest quarterly gain in more than two years at 10 percent.

Of the major metro areas, the largest volume increase occurred in Houston, an astounding 74 percent on $7.2 billion worth of closed sales. Although Hurricane Harvey certainly contributed to lower volumes in 2017, the $4.1 billion total for the year was right in line with recent year figures. San Francisco and New York also experienced major volume increases, 38 percent and 35percent, respectively. Declines in sales volumes were reported for Denver, Dallas and Atlanta while Seattle was flat.

Sales Volume Trends 2017-2018

Investors also remained active in smaller markets that as a whole have seen higher price increases than the top metros during the past three years. Cross-border capital was down slightly in 2018, representing 6.4 percent of transaction volume compared to 6.8 percent in 2017. Still, several countries upped their acquisitions of U.S. apartments significantly.

U.S. Major Metros vs. Non-Major Metros

Cross-Border Analysis 2017-2018

U.S. Economy

Although the recent high volatility in the stock market might be causing jitters, it is far from evident by most economic measures. December’s job growth was above the 300,000 mark for only the second time in two years. Wage growth stayed above 3 percent year-over-over for the final three months of 2018.

Employment and Average Hourly Earnings

The Small Business Optimism Index, published by the National Federation of Independent Business moderated during the last two months of the year but remained elevated at 104.4. The index component which measures job openings reached an all-time high while the difficulty in filling open positions was the highest in at least six years. Plans for hiring and increasing compensation also remained strong. The index components which weakened somewhat included expectations for general business growth, expansion plans and sales growth, indicating some concern about future business conditions.


Fears of the cycle-end in the apartment sector have been essentially dissipated for this year by persistently favorable economic and demographic fundamentals. Rising housing prices and mortgage rates as well as a general lack of inventory will also help the industry achieve steady growth in 2019 and beyond. Click here to read NAA’s annual Apartment Housing Outlook.

March 1, 2019
Strong Fundamentals
Apartment Market Pulse
Fall 2018: Demand for Apartments Remains Steady

U.S. Apartment Market

After a string of quarters of slowing national rent growth, third-quarter results showed a slight uptick in performance. According to RealPage, national rents grew 3 percent year-over-year for the third quarter to $1,352 per month. Like the past two quarters, Las Vegas and Orlando led the way for rent growth among metro areas at 6.6 and 6.5 percent, respectively. Other secondary Sunbelt markets like Phoenix, Jacksonville, Tampa, and Riverside-San Bernardino continued to remain among the top markets. Interestingly, San Jose returned to the top ten after having experienced rent decreases or little growth for the past few quarters, a sign that the San Francisco Bay Area is back in growth mode. Nevertheless, other early leaders of the current cycle like Seattle and Dallas remained at the bottom of the list with growth rates below 2 percent.

The national vacancy rate increased from 4.4 percent in the third quarter 2017 to 4.8 percent in the third quarter of 2018, according to REIS. An elevated rate of deliveries caused Miami to see the largest increase in vacancy at 1.6 percentage points, raising its overall rate to 6 percent. Louisville and Boston followed, both of which saw increases of 1.4 percentage points, resulting in overall rates of 6.1 percent for both. At the other end of the spectrum, Tulsa experienced a vacancy decline of 1.2 percentage points for an overall rate of 5.5 percent, the result of extremely limited new supply.

Metro Areas with Largest Vacancy Decrease

Per the Census, the seasonally adjusted annual rate for multifamily construction starts in August was 392,000 units, a drastic jump of 37.1 percent compared to the same time last year. A strong economy and affordability issues in the for-sale market have continued to support rental demand. Deliveries, however, decreased by 15.4 percent to 285,000 units from the year prior. The number of multifamily permits also pulled back, decreasing to 387,000 units from 461,000 units the previous year. Construction delays, caused by cost pressures and a persistently tight labor market, may have contributed to the drop in deliveries and permits.

% change in Units Started

U.S. Capital Markets

According to Real Capital Analytics, closed transactions for apartment property sales totaled $160 billion for the 12 months leading up to August. This represented a 5.5 percent increase from the year prior, a continued sign of investors’ steady confidence in multifamily. The average price per unit rose from $143,273 to $151,498, a 5.7 percent increase. Investors exchanged just over 1.1 million units, almost unchanged from the previous year.

Analyzed by market, the coastal gateway metros of New York City, Los Angeles, and San Francisco led the way for transaction volume, and each of these regions saw an increase in volume compared to the same period last year. The increase in San Francisco was especially notable, with rent growth having returned after several stagnant or declining quarters, and the region jumped from eighth to third place for transaction volume among all metros. Placing fourth, and ranking highest among inland metro markets, Dallas has moderated since peaking in the fourth quarter of 2016. Other inland markets among the top ten include Houston, Denver, and Phoenix. An increase in Houston’s average price per unit compared to last year seems to indicate investors are seeing value in the market, and the region’s economy appears to have strengthened in sync with the energy industry.

Top Metro Areas by transaction Volume

Looking at the top developers, Greystar ranked first by value of projects, with over $2 billion worth of projects underway. Judged by the number of properties under construction, Greystar also ranked first with 26 properties in development. Lennar and the Related Companies rounded out the top three, with each having at least 20 properties in development.

U.S. Economy

Economic indicators were strong across the board during the third quarter with wage and Gross Domestic Product (GDP) growth capturing most of the headlines. Average hourly earnings increased by 2.9 percent year-over-year in August, its highest level since June of 2009. Through September of this year, average wage growth for all private sector industries was 2.7 percent. The financial activities sector which includes finance, insurance, and real estate witnessed the highest growth in wages while manufacturing and the trade, transportation and utilities sectors were laggards.

Wage Growth by Industry

Source: Bureau of Labor Statistics, seasonally adjusted * Through August 2018

Second quarter GDP also hit high marks, surpassing four percent growth over the prior quarter for the first time in nearly four years. The Bureau of Economic Analysis reported positive contributions from consumer spending, nonresidential fixed investment, exports, and government spending at all levels.

By any measure, the U.S. labor market continued to exhibit its strength. Monthly jobs gains reported by the Bureau of Labor Statistics averaged 208,000 through September, outperforming the past two years; the unemployment rate fell to a near-five decade low of 3.7 percent; and job openings were at an all-time high. In fact, since March the number of job openings has exceeded the number of unemployed persons. The quits rate, which measures voluntary separations (excluding retirement) as a percent of employment was 2.4 percent for all industries and 3.0 percent for the real estate sector, its highest level in nearly 12 years. The quits rate is considered a good indicator of a labor market tipped in employees’ favor as it suggests a level of confidence in being able to find another position.


Economists polled for the National Association for Business Economics’ October Outlook survey reported being more optimistic about the economy compared to the prior quarter, despite serious concerns about trade policy. The apartment industry has outperformed analysts’ expectations laid out earlier this year, with rent growth trending higher than anticipated and demand nearly keeping pace with supply across many markets. Demographic and economic fundamentals, in addition to a softening for-sale market and rising mortgage rates, will fuel sustained demand for rental housing into 2019.     

February 21, 2019
Apartments Demand
Apartment Market Pulse
Summer 2018: Pace of Growth Continues to Slow

U.S. Apartment Market

Second quarter rent and occupancy trends continued to show slowing growth in the national apartment market, although solid economic factors kept the market humming. According to RealPage, rents grew at a year-over-year rate of 2.3 percent. The secondary Sunbelt markets of Orlando and Las Vegas continued to dominate with the highest rent growth rates at 6.6 percent and 5.8 percent, respectively. Alternatively, the markets that posted strong rent growth earlier in the cycle, including Austin, Seattle and Dallas, fell to the bottom of the list with growth rates for each measuring less than 1 percent.

At 4.8 percent as of Q2 2018, the national vacancy rate increased by 50 basis points from the year prior, per REIS. Sixty-four of the 79 markets tracked by REIS saw vacancy rates increase during the past year, with the Buffalo, N.Y.; New York City; and Charleston, S.C., metro areas each seeing increases of 1.6 percent. This is likely the result of the continuing addition of new supply. Only 13 of the 79 markets saw decreases in vacancy, led by the Birmingham, Houston and Norfolk/Hampton Roads metro areas.

Top Metro Areas for Rent Growth

The Census reported that the seasonally adjusted annual rate for multifamily construction starts in May was 404,000 units, a 27.4 percent jump from the year prior. Deliveries totaled 389,000 units, an 8.1 percent increase from the same time last year. Multifamily permits also grew, increasing to 424,000 units from 386,000 units the previous year. Despite the increase in new supply, strong job growth and the constrained for-sale market have continued to support demand.

U.S. Capital Markets

Reflecting steady investor confidence after some unease earlier in the year from rising interest rates, closed transactions for apartment property sales totaled $158 billion for the 12 months leading up to May, according to Real Capital Analytics, up 6.4 percent from the year prior. The average price per unit increased by 5 percent to $148,927, and just over 1 million units changed ownership.

Rental housing continued to be investors’ favorite real estate asset class, with apartments snagging 32.5 percent of all transaction dollars in the 12 months leading up to May. This was ahead of office (26 percent), industrial (16 percent), retail (11.9 percent) and hotel (6.5 percent) classes.

Investment Volume by Asset Class

Coastal gateway markets continued to rank highest by total value of projects started in Q1 2018. Greater New York City was first with $4.7 billion worth of projects started, but the region’s figure has steadily declined after peaking in the second quarter of 2016. This was followed by the Miami, San Francisco, Seattle and Boston regions. The top developer ranked by value of projects was the CIM Group, with projects worth just more than $1.2 billion. Greystar, Mill Creek Residential, LIVWRK and Alliance Residential rounded out the top five.

U.S. Economy

The U.S. economy continued to perform well into Q2 2018. First quarter gross domestic product (GDP) passed the 2.5 percent mark for the second consecutive quarter. At 2.8 percent year-over-year, it was the highest level of growth in nearly three years, driven mainly by nonresidential fixed investment, government and consumer spending and exports. As expected, the Federal Open Market Committee raised the federal funds rate target range a quarter-point to 1.75 - 2 percent at its June meeting. The Fed also revised its 2018 forecast for GDP and inflation upward and lowered the unemployment rate projection from 3.8 percent to 3.6 percent.

Payrolls increased by 213,000 in June, resulting in a second-quarter average of 211,000 monthly new job additions. The past three quarters have exceeded 200,000 average monthly job gains, a marked improvement from the prior year and above expectations, given the tightness of the labor market. The unemployment rate rose by 20 basis points to 4 percent, still below the Fed’s estimate of a longer-run normal rate of unemployment sometimes referred to as “full employment.”

Percent Change in Real GDP


Despite concerns about trade wars and employment pressures, healthy job gains, business and consumer spending and stronger GDP growth continue to buoy the U.S. economy. Investors are still comfortable with consumers’ preferences for renting and favor apartments as an asset class even as rent growth slows. The sustained introduction of new rental housing supply is being offset by climbing interest rates and low for-sale inventory, two trends that are likely to have staying power, dampening the housing market in favor of the apartment sector.
August 1, 2018
Apartment Market Slow Growth
Apartment Market Pulse
Signs of Market Deceleration

While first-quarter trends indicated slowing momentum in the apartment industry, strong job growth kept the market relatively healthy. Even as investors keep tabs on interest rates and operators seek out more efficiencies, job and income growth combined with a tight for-sale housing market, support continued demand for apartments in 2018 and beyond.

U.S. Apartment Market

While first quarter rent and occupancy trends indicated slowing momentum in the apartment industry, strong job growth kept the market relatively healthy. National rents grew 2.3 percent over the past year, according to RealPage. Sunbelt markets continued to dominate the list of top markets for rent growth and Sacramento was no longer the leader. Las Vegas and Orlando led the pack at 6.2 and 6.1 percent, respectively, followed by Sacramento at 5.5 percent. In a sign of its continuing economic recovery, Houston rents grew 4 percent, ranking it sixth. In addition to benefiting from rebounding job growth, the region continued to recover from Hurricane Harvey, as formerly displaced households occupied apartments.

Top Market for Rent Growth

REIS reported an increase in the national vacancy rate from 4.3 percent in first quarter 2017 to 4.7 percent in first quarter 2018. Among the 79 metro areas tracked by REIS, 62 markets experienced higher vacancy rates over the same period. In addition to the winter months traditionally being a sluggish period, vacancy rates were likely made worse by the addition of new supply. The Greenville and New York City metro areas both saw the largest increases in the vacancy at 2 percent each, raising the overall rate to 6.7 and 5.5 percent, respectively. On the other hand, and commensurate to its strong rent growth performance, Houston saw its vacancy rate decrease by 0.5 percent, the fourth largest decrease among markets overall.

The seasonally adjusted annual rate for multifamily unit construction starts in February was 317,000, a decrease of 19.1 percent from the same time last year, according to the Census. Alternatively, a total of 418,000 units were delivered in February, 36,000 more units compared to the previous year. Looking at permits, 385,000 units were permitted in February, a 13.2 percent increase over the same period last year. This was the first annual increase in units permitted since August 2017, and the largest in a year.

Percent Change in Units Permitted

U.S. Capital Markets

According to Real Capital Analytics, closed transactions for apartment property sales totaled $152 billion in the 12 months leading up to February, a slight year-over-year increase of 1.7 percent. Although this increase was the first in a year, sales activity fell substantially for the month of February alone, falling 8 percent compared to the same period a year ago. This was likely the result of investor unease over rising interest rates. Investors exchanged over a million units, a minimal decline of 0.7 percent.

Nationally, average price per unit stood at $146,682, a 2.8 percent year-over-year increase. Confirming the dominance of Sunbelt metro areas for top rent growth performance, the Southeast saw the largest jump in average price per unit with a 10.8 percent increase to $111,082, followed by the Southwest with a 10 percent increase to $132,450. Conversely, the Northeast experienced a 5.9 percent decrease in prices to $256,276, the largest drop among all regions. The New York City metro area ranked low for rent growth, and with the area weighing disproportionately on the Northeast region, this drop in average price per unit is not surprising.

Over the past twelve months, developers were active, particularly in coastal gateway markets. The top apartment developer ranked by the value of projects started was Greystar, with projects worth $1.3 billion. This was followed by the Related Companies with $1.1 billion worth of projects started. Other top developers included JPI Multifamily, Alliance Residential, and Wood Partners. The top metro areas ranked by the value of projects started in the fourth quarter of 2017 were Greater New York City, on top with $5.2 billion worth of projects. The San Francisco, Boston, Los Angeles and Seattle regions rounded out the top five.

Top Developers for Construction Starts

U.S. Economy

After job gains topped 300,000 in February for the first time in 18 months, the March employment report paled in comparison with just 103,000 new jobs. Still, the first quarter average of 202,000 monthly job additions was just above the average since the 2009 trough. In fact, the past two quarters have showed quite an improvement from several previous lackluster figures. The unemployment rate remained unchanged for the past six months at 4.1 percent.

Average Monthly Job Gains

Percent Change Nonfarm Payroll EmploymentThe West Coast and Mountain states dominated job creation through the 12 months ending in February. The strength of the construction sector was the common thread in these states, while Idaho was driven by its financial sector, Nevada by manufacturing, and Utah, leisure and hospitality.  Only three states witnessed shrinking payrolls over this same time period: North Dakota, Alaska, and Delaware.

The healthy pace of overall economic growth solidified the Fed’s decision to raise interest rates in March. The move was widely anticipated by economists and market analysts, many of whom expect three additional rate hikes this year. The Fed revised its GDP forecast upwards for 2018 and 2019, and lowered its unemployment rate projections quite substantially from 4.0 percent to 3.6 percent by 2020.


The recent run-up in interest rates, looming wage and inflationary pressures, and trade and data security concerns have converged to spook the stock market into a highly volatile phase. Its sensitivity and wild fluctuations paint a stark contrast to the stability of other asset classes, including commercial real estate. While investors keep a wary eye on interest rates and operators seek out more efficiencies in operations, job and income growth combined with a housing sector with supply-side struggles, support continued demand for rental housing in 2018 and beyond.


April 18, 2018
Apartment Market Deceleration