While typically a seasonal business, apartment leasing has seen strong demand so far during the winter months. RealPage reports overall occupancy in professionally managed apartments reached a new record in January at 97.6%, with occupancy topping 96% in 146 of the nation’s 150 largest metro areas.
Markets with occupancy rates above 98% included Providence, Rhode Island; Anaheim, California; San Diego; Miami; Riverside, California; New York; Northern New Jersey; Virginia Beach, Virginia; Philadelphia; and Fort Lauderdale, Florida.
“Occupancy rates have never been this high and for a very practical reason—normal turnover,” said Jay Parsons, vice president and head of economics and industry principals at RealPage. “People move out, others move in. There’s usually some time in between leases where the unit is marketed as available. That’s not really happening today. When renters give notice to move out of a unit, another prospective renters swoops in to lease the unit before the current resident even moves out.”
According to RealPage, the key drivers behind the demand for apartments as well as all other types of housing, including for-sale homes and single-family rentals, are household formation, low unemployment, and wage growth.
“We’re asked all the time about the impact of the for-sale housing market on apartment demand, and its impact tends to be significantly overstated,” said Parsons. “Yes, some renters are staying longer because they’re unable to buy a house. But apartment managers are telling us that’s only a small piece of the pie. The bigger driver is rapid household formation among young adults, whose first step as independent householders is usually to rent.”
In addition, RealPage reports that effective asking rents for a new renter rose 0.6% month over month in January, well below last year’s peaks but still unusually high for the month. On a year-over-year basis, effective asking rents for new leases had increased 15%. While rents for households renewing leases tend to be cheaper than a new lease, renewal rent growth has accelerated in recent months.
More affordable Sun Belt markets are dominating for new lease effective rent growth over the last year. According to RealPage, among the top 50 metro areas, markets in the Sun Belt and Mountain regions claimed each of the top 14 spots with 20% to 30% growth. West Palm Beach, Florida, topped the list, followed by Tampa, Florida; Phoenix; Orlando, Florida; Fort Lauderdale; Austin, Texas; Las Vegas; Jacksonville, Florida; Miami; and Raleigh-Durham, North Carolina.
Among the coastal cities for effective asking rents for new leases, New York led the way with 19% growth. Only one large metro experienced effective asking rent growth below 8%—Minneapolis-St. Paul at 4.9%. The Twin Cities recently passed rent control measures, but the biggest factor, according to RealPage, is that the area tends to be a historically low rent growth market.
“We expect rent growth to remain significant throughout 2022 in essentially all markets and all price points,” added Carl Whitaker, director of research and analysis at RealPage. “Barring a major economic slowdown, there’s no reason to expect any meaningful change in the demand drivers boosting the rental housing market—including strong wage growth, household formation, and demographics.”
