Demand for rental apartments reached a five-year high this spring, spurred by new household formation and lagging home sales.
The number of new apartment move-ins in the second quarter of 2019 increased 11% over the same period last year, according to a national report scheduled to be released Monday by real-estate analytics firm RealPage. The demand surge drove the national occupancy rate to 95.8%, compared with 95.4% at the end of the second quarter of 2018, the report said.
RealPage’s chief economist Greg Willett attributed the increase in the second quarter partly to economic uncertainty that slowed the market in the first quarter. “This is catch-up,” he said.
Demand grew particularly in Chicago and Houston. Move-ins in those markets outpaced apartment construction by nearly 3 to 1, RealPage data showed.
Monthly rental prices nationwide shot up 3% from the second quarter of 2018 to the same period this year. Many small metros saw bigger increases. Rents rose 7.4% in Wilmington, N.C., and 6.4% in Huntsville, Ala., according to the report.
Although apartment construction is near the highest it has been in 30 years, much of that new supply is targeting higher-income earners, Mr. Willett said.
With little new affordable supply, the market for lower-cost rentals is much tighter. Most of the new supply “doesn’t really help the consumer in [lower-end] housing where it’s already full,” said Mr. Willett.
The volume of existing-home sales on an annualized basis has fallen for 15 straight months. But the asking price of homes is still increasing at a rate that is faster than income growth.
The shallowing buyer pool and the lack of affordable homes has helped fuel the demand for rentals, said Calvin Schnure, economic analyst at the National Association of Real Estate Investment Trusts. “There’s a shortage of every type of housing,” he said, noting construction hasn’t kept pace with population growth.
Last week, the Trump administration announced it would explore using federal programs to reduce local barriers to housing construction, such as restrictive zoning. Freddie Mac also released a survey showing that American renters increasingly believe they will never afford to buy their own home.