How Large is the US Apartment Market?

According to Joe Fairless, despite a lack of accessible supply, the demand for multifamily housing in the United States remains robust. As a result of expected employment and population growth, the demand for rental apartments is forecast to exceed the supply by the end of 2018. As the national economy improves, this year will see the delivery of more than 600,000 new multifamily units, which is significantly below the level required to meet the predicted growth rate of the housing market.

Fannie Mae's most recent economic prediction expects a robust demand for rental units by 2022, with employment growth ranging from 2.8% to 4.3%. Consequently, the demand for multifamily rental apartments may range between 400,000 and 700,000 units by 2022. Tight vacancy rates, however, will prevent replacement demand from competing with new demand. Consequently, the issue becomes: what is the size of the US multifamily market?

In 2021, house prices are projected to climb by a further 15%, despite the fact that interest rates have stayed low over the last year. This may result in a $264 billion surge in multifamily sales. The majority of this increase, however, is likely due to demand carryover from 2020. In addition, average multifamily capitalization rates have continued to shrink over the previous two years, falling from 5.3% in 2020 to 4.7% in 2021.

The Sun Belt continues to be the area with the highest apartment rental increase. In quest of cheaper operational costs and skill pools, many corporations are growing or moving in this area. These are significant housing demand drivers. According to REIS, the asking rents for new leases in New York City grew by 22.9 percent annually. Identical patterns are also seen in the other coastal marketplaces. If the US multifamily market is expanding, this trend is likely to continue for many years.

Joe Fairless pointed out that as the housing market improves, it is anticipated that demand for rental flats will reach all-time highs. Despite market difficulties, the multifamily business will set a new high in 2022 due to the industry's overall health. The rising economy has boosted household formation, which the epidemic had artificially stifled. These additional households are stimulating the rental market. In 2022, it is anticipated that demand will continue to increase at the same pace as new deliveries, resulting in a 7.6% increase in net effective rents.

The build-to-rent home sector has also seen encouraging developments. Nearly half of U.S. office employees spend at least one day each week in the office, driving demand for urban multifamily housing. Consequently, workplace proximity will continue to be an important criterion for many tenants. And if you are contemplating the purchase of a multifamily property in the United States, you should examine the growth possibilities.

Recent data from the National Association of Real Estate Investment Trusts (NAIFA) and Real Capital Analytics indicate that rent growth and occupancy in the US multifamily market have continued to climb. Year-to-date rental sales volumes are 81 percent greater than they were during the same time in the previous year. Small owners continue to dominate the market, and roughly two-thirds of market purchasers are private individuals. Institutional and REIT purchasers represent just 4% of the transaction market. As rents continue to rise, however, this market may stabilize.

While sales declined in Manhattan, the number of co-ops and luxury apartments sold increased year-over-year, and the market share of bidding battles dropped to its lowest level in thirteen years. Compared to previous year, overall listing inventories increased, and the share of financed sales remained substantially above the decade average. However, resale prices fell significantly as median sales reached their lowest levels since the conclusion of the spring shutdown.

In Joe Fairless’s opinion, as a consequence, the number of new leases signed in Brooklyn reached its highest level since the monitoring period began in 2008. In the meanwhile, the number of listings decreased annually, and net effective median rents reached their lowest levels in almost a decade. In addition, landlord concessions increased at the slowest pace since January 2020, lowering the market share of new Brooklyn constructions. The reduction in new listings was especially severe in the lowest price stratum.