In May, the apartment occupancy rate rose above 95 percent for the first time since Dallas-based Axiometrics began tracking the apartment market six years ago. In June that number stayed above 95 percent, while the concession rate fell to 0.78 percent (a five-year low), and annualized rent growth grew to 3.6 percent (the highest total since December 2012).
So what about those worries of oversupply and a recovery that was beginning to plateau? It's simply not an issue yet. "There is still a lot of supply left to deliver this year, but demand is keeping up with it to this point," says Jay Denton, vice president of research at Axiometrics. "We have not seen the homeownership rate start to tick up like we thought it would, which means people are still opting for rental housing."
Ultimately, Denton doesn't think mid 2014 will top mid 2011 on a 12-month basis, partially because late 2010 saw such strong rent growth. But overall, things still look good. "Supply is weighing on certain spots in the market more than others," Denton says. "Most urban cores, where you see a concentration of new supply, have weak rent growth right now. Suburban and class B properties tend to have the best rent growth at this point. They are not as impacted by supply simply because they don’t keep on a price point basis, or because supply isn’t as concentrated like the urban core."
Here is more from the release (with local market data coming soon):
DALLAS (AXIOMETRICS) – The national apartment market maintained its strong 2014 performance in June, as year-to-date effective rent growth continued to exceed that of any other post-Great Recession year, according to Axiometrics, the leading provider of apartment market research and data.
June’s concession rate of 0.78% was the lowest in at least five years, annualized effective rent growth of 3.6% was the highest since December 2012 and occupancy remained above 95% for the second straight month.
“In April, 2014 year-to-date (YTD) effective rent growth just edged 2011 and 2012 to position itself as the strongest year of the recovery,” said Jay Denton, Axiometrics Vice President of Research. “The apartment market’s performance in the past two months has widened the gap.”
June’s 2014 YTD effective rent growth rate of 4.5% represented a nice increase from the 3.6% recorded in May 2014. Whereas the YTD rate in both May 2012 and 2011 was 3.3%, the June figures those years were 3.9% and 4.1%, respectively.
“It would be accurate to say that in 2014 the apartment market has generated its strongest post-recession first half performance,” Denton said.
This year’s YTD effective rent growth will have to reach 4.8% or higher in July to maintain the No. 1 position in the second half of the year.