Apartment rent and occupancy hit record highs in November

Apartment rent and occupancy hit record highs in November

by Real Estate News

A “For Rent” sign posted in front of an apartment building on June 02, 2021 in San Francisco, California.

Justin Sullivan | Getty Images

Apartment rent growth and occupancy set new records in November, yet another sign that the nation’s housing market isn’t following seasonal patterns this year. Rent growth and occupancy usually cool heading into winter.

Apartment occupancy hit a new high of 97.5{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} in November, according to RealPage, a real estate technology platform. The rate is up roughly 250 basis points from the long-term norm of about 95{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} going back over the past three decades.

The annual increase in asking rents for new move-in leases hit 13.9{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} in November. Renewal lease rent growth usually climbs more slowly than when there’s turnover in a unit’s occupant, but it has still been growing at 8{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} even during the later part of the year.

“The demand from renters is really strong, especially for the luxury product. As the economy has recovered we’ve done a better job in high- paying employment than we have in the lower paying jobs,” said Greg Willett, chief economist at RealPage.

This is usually the time of year that landlords see lower occupancy and therefore offer incentives or cut lease prices. Demand, however, continues to outstrip supply in the rental market, as it is also in the for-sale housing market.

“The rental market is actually stronger than the for-sale market right now. The rent increases are something like I’ve never seen before in my life, so we are definitely pulling forward a lot of household formation,” said John Burns, CEO of John Burns Real Estate Consulting.

November rent prices were up 0.6{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} from October. While that is below the growth seen in the spring and summer months, it is notable because rent prices usually decrease in the fall months.

What’s driving demand

Rental demand is soaring due to the very high prices in the for-sale market, which are up nearly 20{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} year-over-year. Also, fewer people are choosing to live with roommates. In certain markets, owner-occupant homebuyers are being pushed out by usually all-cash investors.

“With this work-from-home and the stimulus and everything else – not enough WiFi, too noisy in the house – a lot of people are living on their own or they had two roommates and now they’ve got one, and that’s been the big reason for the surge in the apartment demand,” added Burns.

Household formation had been growing steadily before the pandemic, but then dropped off abruptly when Covid-19 hit the U.S., according to Census figures. Within a few months it began to climb again and has been accelerating in the last six months.

High prices in the for-sale housing market are also presenting an opportunity for older homeowners who might want to cash out at the top of the market. They, in turn, are moving into luxury rentals, taking up more supply and keeping rents inflated.

Regionally, rent growth is now strongest in West Palm Beach, Tampa and Phoenix, with annual gains of 26{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} to 28{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}. Austin, Orlando, Fort Lauderdale, Las Vegas, Jacksonville, Atlanta, Salt Lake City, Raleigh/Durham and Miami also saw rent growth above 20{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}.

Rent growth is now weakest in the Midwest. Out of the nation’s 50 largest metropolitan markets, Minneapolis saw the smallest rent increase of just over 4{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} from a year ago.

As housing costs soar, homebuilders develop houses for rent

As housing costs soar, homebuilders develop houses for rent

by Investment Property

Home builders and other real estate companies are increasingly betting that would-be home buyers frustrated with a shortage of homes for sale and runaway prices will settle for renting their slice of the American dream.

Although individual homeowners and mom-and-pop investors still account for the vast majority of single-family rental homes, home builders have stepped up construction this year of new houses for rent.

In the third quarter, builders broke ground on 16,000 single-family homes slated to become rentals. That’s the highest quarterly total of housing starts for built-to-rent homes going back to at least 1990, according to an analysis of U.S. census data by the National Assn. of Home Builders.

The trade association’s analysis includes only homes that builders are going to hang on to and rent out. That excludes homes being built to be sold to real estate investment trusts or investors planning to rent the properties.

Although those rental homes accounted for only 5.4{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} of all single-family housing starts in the third quarter, builders are doubling down on the build-to-rent model, with some already aiming to build more homes for rent for investors or corporate landlords eager to capitalize should potential homeowners continue to struggle to find affordable properties.

“Traditional builders are finding it very hard to do entry-level housing,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker. “The build-to-rent space kind of serves its purpose as being entry-level housing in a market where new homes at a reasonable price point are few and far between.”

Rising home prices and fierce competition for relatively few affordable homes for sale are stretching the limits of affordability for many would-be buyers. The median price of a previously occupied U.S. home jumped to $353,900 in October, a 13.1{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} increase from a year earlier, according to the National Assn. of Realtors. Homes sell within days of being put up for sale.

These trends have been good news for landlords, however. Rents for U.S. single-family homes jumped 10.2{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} in September from a year earlier, according to real estate information company CoreLogic. The firm excludes apartments from its single-family home rental data, though it includes condominium and townhome rentals.

CoreLogic expects rents to continue climbing through at least the end of this year, citing strong demand, low supply of homes for rent and a strengthening job market.

Recent quarterly earnings from the nation’s two largest publicly traded owners of single-family houses for rent underscore the favorable outlook.

Invitation Homes and American Homes 4 Rent both reported strong third-quarter results, boosted by rising rents and occupancy rates near all-time highs.

BTIG analyst James Sullivan reiterated his “Buy” rating for both real estate investment trusts, noting that housing market trends — including the supply chain challenges and rising labor and material costs that are slowing the pace of construction for home builders — remain “very favorable” for single-family rentals.

Construction of new U.S. homes was running at a seasonally adjusted annual rate of 1.52 million units as of October, according to the Commerce Department. That’s an increase of 0.4{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} from the rate a year earlier. But single-family home starts fell 3.9{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} from September to October and were down more than 10{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9} from a year earlier.

The number of housing starts for built-to-rent houses remains small relative to newly started homes slated for sale. All told, builders broke ground on 47,000 homes for rent over the last four quarters, a year-over-year increase of 17.5{d4d1dfc03659490934346f23c59135b993ced5bc8cc26281e129c43fe68630c9}, according to the home builders group. In the same period, builders broke ground on 1.14 million single-family homes.

Some of the nation’s largest home builders are looking to take advantage of the demand for built-to-rent homes.

Some sell houses to investors or companies looking to take over communities already packed with tenants. In July, PulteGroup announced a deal to build and sell roughly 7,500 homes over the next five years to Invitation Homes.

D.R. Horton has been building apartment complexes and single-family rental home communities. This month, it estimated that its rental operations will generate more than $700 million in revenue from rental property sales during its current fiscal year. Horton also said it expects to increase its investment in its rental business by more than $1 billion in the same period.

Last spring, Lennar formed a venture with several institutional investors that aims to spend more than $4 billion to buy new single-family homes and townhomes from the home builder and, potentially, other builders, and then rent them.

“It’s really evolved over time, but the star of the real estate show today is the build-to-rent space,” Wolf said.

Estate agents accused of ‘slap in the face’ to renters with ads for investment properties that are not subject to rent cap limits

Estate agents accused of ‘slap in the face’ to renters with ads for investment properties that are not subject to rent cap limits

by Investment Property

Estate agents have been accused of “slapping first-time consumers and renters in the face” with commercials encouraging home buyers to acquire residences because they are not capped beneath Rent Tension Zone (RPZ) legislation.

t arrives as landlords were alleged to have pushed up rents over and above boundaries imposed underneath restrictions.

Labour councillor for Limerick, Conor Sheehan, stated he was “dismayed” to see this sort of advertising and marketing practices whilst property-looking not long ago.

In 1 advert for a semi-detached household, an estate agent advertised the home as being “an perfect possibility for any first-time purchaser or for people who are searching for a probably valuable investment house with a robust produce not capped under RPZ legislation.”

Mr Sheehan, who has struggled to get on the assets ladder because of to rocketing residence charges, stated “the market is entirely in favour of buyers and landlords”.

“I was stunned but not stunned to see this. The point that the seller is encouraging a future consumer to acquire this home since it is exterior a RPZ, and hence they could demand exorbitant lease in exchange for a great return, is sickening.”

The Residential Tenancies Board (RTB), the State’s rental watchdog, reported there was “an unacceptable stage of non-compliance by landlords” just after its most recent rents index recorded rents increasing at premiums previous viewed ahead of the pandemic.

This is in spite of caps on rent raises currently being released in a few-quarters of the state. The RTB mentioned it was “concerning” that rents rose nationally by 7pc amongst April and June this calendar year.

Buyers snapping up households has been a big talking point in Ireland’s housing disaster and some estate agents have been focusing on their ads at individuals on the lookout to rent out qualities.

Another advertisement for a dwelling in a sought-right after residential spot reads: “Investors will be drawn to the chance to acquire a excellent asset with a likely lucrative rental earnings (currently uncapped beneath RPZ).”

Landlords bringing new rental houses to the marketplace or new tenancy agreements are exempt from laws on lease caps, so can effectively cost what they like.

Pat Davitt, main govt of the Institute of Expert Auctioneers and Valuers (Ipav), explained: “The Authorities is mindful of what’s heading on. It’s up to them to transform it. Estate agents publicize what is factual. It may possibly very well be contributing to the challenge [of investors buying family homes], but it is factual.”

Mr Davitt claimed that the RTB report released this week need to have a “health warning” as it does not differentiate involving homes in rent tension zones and those people that are exempt from the guidelines, irrespective of staying in these specified locations.

“It could be that these new rental attributes are driving rents greater, fairly than landlords flouting guidelines,” he stated.

The Federal government has now vowed to crackdown on rogue landlords just after rents surged by as much as 17laptop in some pieces of the nation.

The normal month to month rent nationwide now stands at €1,352 for each month, up seven for each cent year-on-12 months.

Renters in counties outdoors hire pressure zones – such as Longford and Leitrim – observed hikes of between 15.9computer and 17.3pc.

Padraig McGoldrick, interim director of the RTB, explained landlords who flout hire caps could be fined up to €15,000. The RTB is at this time investigating around 400 instances of non-compliance by landlords in relation to rent raises.

Housing charity Threshold said rent increases are pushing men and women into money issues.

One shopper of the charity had been dwelling in her rental dwelling for above 10 years, when her rent was hiked by €200, an increase of 20computer.

“She was by now battling to deal with the hire and often couldn’t set credit rating in her cellphone,” the charity reported. “Threshold was ready to assist her to dispute the hire boost, which was invalid, as she was living in a RPZ. The landlord issued a new hire assessment see in line with the RPZ policies.”