October 3, 2019
While national apartment occupancy and rent growth were slow to flat in Q3 2019, fundamentals driving the sector remain healthy, according to information released by REIS Moody’s Analytics Inc. Specifically, “demand growth increased in line with supply growth, and rent growth held steady at just below 1% in the quarter,” the data analytics company said.
Both asking and effective rent growth were 3.8% year over year, while the vacancy rate remained unchanged at 4.7%. The net absorption of 32,871 units was lower than the Q2 2019 absorption of 48,698 units; construction also dropped, quarter over quarter. “We expect some revisions to these numbers, but they were nevertheless disappointing,” the Reis analysts said. Still, the forecast for 2019 is that more apartment units will be added, beating 2018’s total of 234,000. In fact, fewer metros experienced a vacancy increase in Q3, mainly due to “high construction that exceeded net absorption.”
Reis’ forecast, in the meantime, could be considered guardedly optimistic. Even as the overall economy is experiencing a deceleration, “the demand for apartments should continue at this pace, as the housing market takes the brunt of any and all uncertainty,” the Reis analysts wrote. While new and existing home sales did improve during the month of September, condominium and co-op sales declined. This is likely to continue, given continued uncertainties when it comes to the trade war and global slowdown scenarios.
However, “as long as job growth remains healthy, the demand for both (housing and apartments) will stay positive, shoring up home prices and rents, equally,” Reis analysts concluded.
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