Household Formation Suffers in May
Since mid-March, the national occupancy level declined by 0.4 percentage points. At the end of May, it sat at 95.2%, according to RealPage.
Usually, occupancy tightens as the weather heats up. But with COVID-19, this hasn’t been a typical spring. In May 2019, it sat at 96%.
RealPage’s data reveals that, out of the 50 largest markets in the country, only New York and Virginia Beach, maintained occupancy consistent with year-ago results. San Francisco suffered the biggest year-over-year occupancy loss, with a decline of 2.2 percentage points. Orlando, Salt Lake City, Las Vegas, Los Angeles and Raleigh/Durham saw occupancy drops between 1.3 to 1.6 percentage points.
With rent decreases occurring in both April and May, effective asking rents are now down on an annual basis for the first time since the middle of 2010. Overall, effective asking rents have declined from May 2019 to May 2020 and sit at $1,412 nationally. Effective asking rents reflect listed prices minus stated discounts that are offered.
The most significant drops in effective asking rents were in the West region. Apartment operators dropped rents 4.9% in San Francisco and 4.4% in San Jose. In Los Angeles, Oakland and Denver, asking rents fell 3%. Orlando saw asking rents decline 3% as the tourism market floundered.
In 22 of the nation’s 50 biggest metros, the annual change in effective asking rents was still at least slightly positive. RealPage saw the biggest growth – gains of 2% to 2.9% – in Memphis, Cincinnati, Phoenix, Greensboro/Winston-Salem, Virginia Beach and Riverside/San Bernardino.
Achieved rents on new leases also declined. May 2020’s achieved rents for new-resident leases ran 3.8% below the lease transaction prices generated in May 2019, according to RealPage. Executed lease price cuts went 8% or more in Boston, Detroit, New York, Salt Lake City, San Francisco and San Jose. However, executed lease prices for new residents were still up at least 2% annually in seven markets: Cincinnati, Columbus, Memphis, Milwaukee, Nashville, Pittsburgh and Virginia Beach.