News & Research Listing

Apartment Market Pulse
Fall 2020: Weathering the Storm Amid Uncertainty

U.S. Apartment Market

Although apartment fundamentals in the second quarter revealed the economic effects of the Coronavirus pandemic, solid demand during the third quarter signaled the beginning of a recovery. According to RealPage, national occupancy fell by 0.6 percentage points year-over-year, albeit improving by 0.2 percentage points since the previous quarter. Job growth and pent-up demand fueled leasing activity. REIS reported that Buffalo, Albuquerque, Lexington, Dayton and Wichita were the strongest markets for occupancy growth year-over-year.

National effective rent during the third quarter averaged $1,417 per month, a decline of 1.9 percent compared to Q3 2019. Lower-priced markets persisted in outpacing major markets. According to RealPage, rent growth leaders included secondary markets such as Riverside, Sacramento, Virginia Beach, Greensboro and Memphis. Gateway markets like San Francisco, San Jose, New York City, Boston and Los Angeles continued to experience steep rent decreases.

Annual completions of 323,921 units outpaced the 197,462 units absorbed during the quarter. Although this marks the second consecutive quarter supply outweighed demand, the gap is begging to close. In September markets with the highest completions included New York (29,337), Houston (15,811), Austin (14,945), Dallas (11,405) and Miami (11,392).

Census reported the seasonally adjusted annual rate for multifamily construction starts in September was 390,000 units, a significant decline of 22.2 percent compared to the same time last year. The number of multifamily permits also weakened, decreasing to 390,000 units from 501,000 units from the year prior. Deliveries, however, increased dramatically by 79.1 percent to 480,000 units compared to September 2019.

U.S. Capital Markets

Multifamily investments have also begun to show signs of a recovery in Q3 2020. According to Real Capital Analytics, closed transactions for apartment property sales totaled $23.3 billion. This represented a 50.2 percent decrease year-over-year yet improving by 17.0 percent since Q2 2020. The average price per unit stood at $163,485, falling by 6.7 percent. Although price appreciation has slowed since the beginning of the pandemic, investors are still realizing the values of apartments despite decreasing rents and reduced transaction volume. Investors exchanged nearly 147,535 units, a 50.3 percent decline from the previous year. The average cap rate was 5.3 percent, down by 27 basis points. Individual property and portfolio sales volumes were down 52.6 and 37.9 percent, respectively, compared to the previous year.

U.S. Economy

After dropping by a record 31.4 percent in Q2 2020, Gross Domestic Product (GDP) rebounded in Q3, increasing 33.1 percent but only recovering 75 percent of the losses. Consumer spending was responsible for most of the gains while trade and government spending, with no new stimulus packages and state and local government output declining, negatively impacted GDP.  

The employment picture continued to improve, but the pace of growth has started to slow. With 638,000 jobs added in October, the U.S. remained 10 million jobs behind February’s level. The unemployment rate fell by one full percentage point to 6.9 percent. Initial claims for unemployment remained persistently high, averaging 784,000 per week in October, above the highest pre-COVID level. Continuing claims for unemployment have been on the decline, however, some of which is attributable to re-entrants into the job market, but much of it a result of expiring benefits.

Labor market conditions varied widely by geography and sector, with a 10-percentage point difference in unemployment rates among the 50 largest metropolitan areas and Washington, D.C. Cities that rely on tourism and convention business as well as entertainment still had double-digit unemployment rates as of September, with Las Vegas (14.8 percent) and Los Angeles (13.6 percent) at the bottom. Half of the top 10 metros for low unemployment rates were in the Midwest. Kansas City and Oklahoma City were tied for the lowest unemployment rates at 4.9 percent.

As for sectors, winners and losers were often in the same sector, such as transportation/warehousing and retail trade. Employment in transit/ground passenger transportation was down 24.4 percent year-over-year while courier/messenger jobs ballooned by 14.1 percent. Similarly, in retail trade, employment in building material/garden supply stores was up 7.2 percent while employment in clothing/accessories stores contracted 24.3 percent.

The single-family housing market has led the recovery with many indicators breaking records as they returned to pre-pandemic levels, exhibiting a V-shaped recovery and then some. The National Association of Home Builders’ Index has seen record highs month after month in builder confidence in current and future conditions. Both new and existing home sales surged immediately after lockdowns were lifted in the spring and have stayed elevated through October, while prices for existing homes have witnessed double-digit growth for three consecutive months, according to the National Association of Realtors. With housing supply at an all-time low and increased costs for materials and labor both impacting prices, prospective buyers may soon be shut out of the market, dampening the feverish pace of growth. 


Recent news about COVID-19 vaccines potentially being available to the most vulnerable populations by the end of the year bodes well for a stronger recovery in 2021. However, without additional fiscal stimulus, more business failures can be expected in addition to eroding household balance sheets, particularly for the millions who remain unemployed and face expiring benefits in the coming months.

The outlook for the apartment sector will vary widely by asset type and especially geography. Higher-end apartments in large coastal cities have already taken a hit on rents and occupancy and continued weakness can be expected until there are large-scale re-openings of businesses and services. More affordable properties in smaller cities and suburban locales should fare better in the short-term, but again, a lack of fiscal stimulus could easily upend that expectation.

December 7, 2020
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