News & Research Listing

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
Economic Impact, Research Reflections
Economic & Industry Update July 2021

Economic Indicators

The Labor Market

The June jobs report was strong, with 850,000 jobs added plus an upward revision of 15,000 jobs in April and May combined.

The labor market still has 6.8 million jobs to recover or add to return to pre-pandemic levels.

Only two states have exceeded their payroll levels of February 2020: Idaho and Utah. At the opposite extreme, California remained down 1.2 million jobs and New York is down 951,000 jobs.


Top States for Job Recovery February 2020 to June 2021


Unemployment Claims

After hitting its lowest level since the pandemic began, initial claims for unemployment posted a surprising increase for the week ending July 17.

Expanded benefits will expire at the end of September, but 26 states have already stopped additional payments.


Unemployment Claims for the Week Ending July 17, 2021


Source: U.S. Employment and Training Administration, Initial Claims [ICSA], retrieved from FRED, Federal Reserve Bank of St. Louis; July 27, 2021

Consumer Sentiment

July consumer sentiment fell by nearly 5 points to 80.8, with the expectations index experiencing a steeper drop than the current conditions component.

The decline was mainly due to inflation expectations with the percentage of consumers citing elevated prices for vehicles, homes and durable goods at a record high.


University of Michigan Consumer Sentiment Index July 2021


Personal Saving Rate

The personal saving rate dropped to its lowest level since the pandemic began but remains elevated at 12.4%.

As fiscal stimulus impacts wane and consumers start making purchases put off last year –at higher prices –the saving rate can be expected to erode further in the coming months.


Personal Savings Rate May 2021


Small Business Optimism

The Small Business Optimism Index rose to its highest level since November.

The largest increase occurred in the component measuring future business conditions, although it remains in negative territory.

46% of business owners had job openings that could not be filled, a slight drop from the prior month’s all-time high but more than double the 48-year historical average of 22 percent.


National Federation of Independent Businesses Small Business Optimism Index June 2021


The Back to Normal Index

The Back to Normal Index tracks twelve high frequency data series plus monthly employment figures, using February 29, 2020as the baseline for “normal.”

The index has been moving sideways this month with a reading of 92 during the third week of July.

The fifteen largest states ranged from 81.2 in New York to 98.1 n Florida, which had previously surpassed (>100) pre-pandemic activity.


Back to Normal Index July 2021


Home Price Index

The S&P/CoreLogic Case-Shiller 20-City Composite Home Price Index set its second consecutive record in May, increasing 17% year-over-year.

Home prices in Phoenix soared nearly 26% while the remaining cities all experienced double-digit growth.


S&P/CoreLogic Case-Shiller 20-City Composite Home Price Index May 2021


Source: S&P Dow Jones Indices LLC, S&P/Case-Shiller 20-City Composite Home Price Index, retrieved from FRED, Federal Reserve Bank of St. Louis; July 27, 2021

New Home Sales

New home sales declined for the third consecutive month with prior months’ figures revised downward by 90,000 units. This is the lowest level of sales since the height of the pandemic shutdowns in April 2020.

Supply chain, labor constraints and an ever-growing pipeline are weighing on the home-building market while surging home prices and waning fiscal stimulus impacts are moderating demand.


New home sales June 2021


New Home Building

Overall homebuilder confidence fell slightly in July, but the component measuring buyer traffic fell by six points.

However, any reading over 50 means more builders view conditions as good rather than poor. The overall index remained elevated at 80.

Despite materials costs and labor market issues, builders remain optimistic as the future sales component rose two points.


NAHB/Wells Fargo Housing Market Index July 2021


Housing Permits

Single-family and multifamily permitting activity has declined for four and three consecutive months, respectively.

Myriad issues continued to plague the construction industry, yet activity remained elevated for single-family permits and in line with 2019 levels for multifamily.


Housing Permits June 2021


Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development, New Residential Construction, July 20, 2021

Housing Starts

Housing starts were higher than expected in June.

Multifamily starts increased 6.8% over the month but the prior two months were revised downward by 29,000 units.

Activity was strong in the West and South but contracted in the Northeast and Midwest.


Housing starts June 2021


Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development, New Residential Construction, July 20, 2021

Apartment Industry Indicators

Apartment Rental Rates

Multifamily asking rents increased substantially by 6.3% on a year-over-year basis in June. This was the largest increase in the history of Yardi’s data set.

Renter migration is pushing up rents in the Southwest and Southeast markets.

People are returning to urban cores markets. New York, Seattle, Chicago and Washington, D.C. have begun to rebound.


Top and bottom markets for year-over-year rent growth June 2021


Multifamily Investor Intentions

  • Multifamily/residential was the second most preferred property sector for 2021 investment in the Americas and EMEA.
  • Preference for the sector remained the same as 2020 at 25% of survey respondents.
  • Student and senior housing remain popular among alternative real estate sectors, but not as much as in 2020.
  • Single-family rental housing and co-living both registered strong interest.
  • Austin and Phoenix were the top-ranked markets in the United States.
  • In contrast to other sectors, most multifamily/residential investors do not expect any pricing discounts.
  • Key strategies for 2021 include a greater emphasis on tenant credit and rent roll growth, along with a stronger focus on long-term growth.
  • Environmental, Social and Corporate Governance criteria ranked the third key priority by respondents.

Source: Global Investor Intentions Survey 2021-Multifamily/Residential June 2021 by CBRE Research

Capital Market Trends

  • Apartment deal activity in Q2 2021 shot up by 238% year-over-year and 40% ahead of pre-pandemic averages. It also stood at a record-high level for any second quarter period.
  • Year-over-year price change increased by 12%.
  • Total transaction volume reached $52.7 billion; individual asset sales made up $43.3 billion in sales.
  • There is slightly less momentum behind the rise in the sale of mid/high-rise assets. In contrast, garden apartments sales saw higher increases.
  • The RCA CPPI for garden apartments climbed 12.7% year-over-year in Q2 as opposed to only a 4.7% pace for mid/high-rise assets.
  • Dallas, Atlanta, Phoenix, Los Angeles and Denver were the most active markets for apartment investments during the second quarter.

Source: Capital Trends US Apartment Q2 2021 by Real Capital Analytics July 2021

View previous Economic & Industry Updates here.

August 27, 2021
Special Reports
NAA Inflation Tracker: September 2021

CPI, Latest Release, August 2021, 5.2%

The Consumer Price Index (CPI) rose 5.2% on a year-over-year basis, while prices excluding food and energy (core CPI) rose 4.0%, lower than the prior two months. On a monthly basis, CPI and core CPI recorded their slowest pace of growth in 7 and 6 months, respectively, and were below consensus expectations.   

Breaking it down by categories excluding food and energy revealed the highest price increases this month in new vehicles (1.2%), hospital services (0.9%), and motor vehicle maintenance and repair (0.8%) while airline fares fell 9.1%, motor vehicle insurance was down 2.8% and used cars and trucks experienced a 1.5% decrease.

The data suggest the Delta variant may be hindering some consumers from moving forward with leisure activities. In addition to declining airfares, prices were also down for lodging away from home as well as car and truck rentals.

Source: US Bureau of Labor Statistics

Alternative Measures of Inflation, July 2021

We have examined several alternative measures of inflation in prior Inflation Trackers, but the Atlanta Fed consolidates all of them into an Underlying Inflation Dashboard, updated monthly.  As of July, the most recent update, two-thirds of inflation measures tracked in the dashboard were running one-half a percentage point or more above their targets – a troubling indicator of potentially longer-term price pressures.   

Source: Federal Reserve Bank of Atlanta

Alternative Measures of Inflation, July 2021

The Personal Consumption Expenditures (PCE) Index is the measure of inflation the Federal Reserve Bank uses in its policy decisions. It is produced by the Bureau of Economic Analysis and uses different formulas, different weights and has a different scope compared to the Bureau of Labor Statistics’ (BLS) CPI. 

In July, the core PCE increased 3.6% year-over-year, the same level as the prior month (revised upwards) which was a 30-year high. On a monthly basis, the 0.3% increase in the core PCE was the smallest gain since February. At its current rate of 3.6%, it would take 5 more months for the PCE to achieve a five-year average of 2%, the Fed’s long-term target.

Sources: U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis


The Producer Price Index (PPI), August 2021

The BLS aggregates all construction inputs excluding capital investment, labor and imports for single-family and multifamily construction. Price increases finally decelerated in August, but are still highly elevated at 20% and 19.6%, respectively, on a year-over year basis.  While lumber prices have finally moderated, the costs of steel mill products, building paper products and asphalt, among others, are still experiencing massive increases.

Source: U.S. Bureau of Labor Statistics


Wage Growth, August 2021

Wage growth, as measured by the change in average hourly earnings, has been nothing if not volatile since the pandemic began, reflective of large fluctuations in employment levels, particularly among lower-wage workers.  In August, wages increased 4.3% on a year-over-year basis, driven by the leisure & hospitality sector, education & health services, and retail trade.

With the number of job openings at record levels and businesses experiencing persistent hiring challenges, wage increases can be expected to continue until the labor market begins to normalize. The end of unemployment benefits and the return to full-time classroom instruction should result in more and more workers returning to the labor force.   

Source: U.S. Bureau of Labor Statistics

What to Watch in the Next Month

  • There are initial signs this week that the Delta variant may have hit its peak in the U.S. If this is true and there are no additional restrictions put in place for businesses, we may very well see more subdued price increases in the coming months. Several Asian countries, which had closed factories and ports, are considering easing up on COVID-19 restrictions which will help alleviate some of the supply chain bottlenecks that are causing price hikes around the globe.
  • The Federal Open Market Committee meets September 21-22. Between signs that inflation may be moderating and the disappointing August jobs report, it is highly likely there will not be any policy changes announced at the meeting. However, the Fed has indicated it may begin slowing the level of its monthly bond purchases before the end of this year.

Next Tracker: October 13, 2021

September 14, 2021
Research, Special Reports
The Complexities of the Digital Generation: Insights From the NAA/ SatisFacts/ ApartmentRatings Survey on Gen Z

Generation Z prevails above other generations as the most ethnically diverse and best educated. To better understand housing trends for this generation, the National Apartment Association in partnership with SatisFacts/ApartmentRatings conducted a survey of Gen Z renters in November/December 2020. Survey results are based on 927 responses from 18- to 23-year-old apartment dwellers. The full report uncovers the cohort’s geographical preferences, homeownership and renting sentiments, and preferred apartment amenities.

View Full Report

Below is a selection of key takeaways from each section:

Focus on Students - Top Regions for Retention & Migration

24% of survey respondents plan to work in the health care field post-graduation. Demand for health care workers was highest  in Arizona, Colorado, Alaska and Idaho in 2020 as measured by location quotients. Fifty-eight percent of college students plan to stay put after graduation while the remainder will relocate. The top regions for retention and migration combined are the Mid-Atlantic and Pacific.

Location and Property Type Preferences

A pie chart showing what types of areas students hope to live in after graduation. "Vibrant suburbs" is the top location, with 44%.The trend to move away from cities to  the suburbs continues for Gen Z’s; approximately 44% of respondents said they would prefer to live in a vibrant suburb. Also, a significant 43% desire to rent single-family detached properties after graduating.




Location Factors

A pie chart showing results of the question, "What factors will influence your decision for the next location of your apartment?" with proximity to work/school in the lead with 36%.Proximity to work or school was the key location determinant for 36% of Gen Z’s still enrolled in college, followed by proximity to entertainment, dining, shopping and gyms.





Renting Sentiment 

The majority (89%) of Gen Z survey respondents agree that renting requires you to follow the property owners’ rules. Although 64% came to the consensus that renting provides an adaptable living arrangement. Gen Z renters also believe that buying a home is more financially sensible than renting; 58% indicated that renting feels like throwing their money away.

Homeownership Sentiment

89% of Gen Z’s surveyed believe that homeownership provides both more control and privacy than renting. Few Gen Z’s consider home prices an obstacle toward homeownership, as 69% are confident that it will be financially feasible to own a home at some point in their life.

Gen Z homeowners' sentiment survey results

Community Amenities

According to survey results, Gen Z renters’ value guaranteed parking, Wi-Fi enabled communities and security and access control features above all community amenities. In contrast, onsite retail, car charging outlets and business centers were of lesser importance.

Top Five community amenities for Gen Z, with guaranteed parking being the top amenity.

In-Unit Apartment Amenities

Gen Z renters are savvy yet practical consumers who additionally value a functional living space with upgraded features. The majority of participants said that strong internet speeds, spacious floor plans and premium features such as a washer/dryer, walk-in closets, balconies and hardwood floors are key factors in their decision-making. However, keyless apartment entry, smart-home controls and a dedicated office/workspace are not critical features.

Gen Z's top five in-unit amenities, with washer/dryer, spacious floorplans, interior features, and internet speed inside the apartment tied for number one. The fifth amenity is cellphone reception.

For more information

For more information, please contact:

Leah Cuffy

Paula Munger

The NAA logo        Apartment Ratings logo        Satisfacts logo
June 28, 2021
Research Reflections
NAAEI Apartment Jobs Snapshot April 2021

Total April Job Postings in Apartment Industry (1) 13,386

% of Real Estate Sector: 37.3

Top Job Titles   Number of Postings

Leasing Consultant


Maintenance Technician


Property Manager


Assistant Property Manager


Maintenance Supervisor



Job Postings by Major Category       

Property Management







Top MSAs (2)     % Apartment Jobs of Total Real Estate Jobs

Kansas City






Virginia Beach


San Antonio


Time to Fill Top MSAs (3)

Virginia Beach


Kansas City






San Antonio


Spotlight On: Property Manager/Community Manager  

Last 6 Months


Location Quotient (4)



Kansas City








Market Salary 90th Percentile (5)                   $56,137

Market Salaries (90th Percentile) in MSAs with Highest Concentration of Demand









Kansas City


Top Specialized Skills      

  • Property Management
  • Budgeting
  • Yardi Software
  • Customer Service
  • Staff Management

Top Baseline Skills

  • Communication Skills
  • Microsoft Excel
  • Microsoft Office
  • Organizational Skills
  • Microsoft Word

1 Based on job postings that include employer.

2 MSAs with 100 or more apartment job postings.

3 Based on historical information; weighted average based on positions with 100 or more postings.

4 Location quotients display concentrations of demand within MSAs. U.S-wide average demand equals 1.0; a location quotient of 1.5 indicates 50% higher demand than the US average.                         

5 Market salary is calculated using a machine learning model built off of millions of job postings every year, and accounting for adjustments based on locations, industry, skills, experience, education requirements, among other variables. Salaries in the 90th percentile are displayed due to the tightness of the labor market in the apartment sector. 

Source: NAA Research; Burning Glass Technologies;

Data as of April 30, 2021; Not Seasonally Adjusted 


May 17, 2021
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
An angled view of a series of apartment buildings in a community