June 27, 2019
Reis’ just-released, preliminary apartment numbers for Q2 2019 showed a mixed bag of metrics. While quarter-over-quarter and year-over-year vacancy rates remained unchanged at 4.7%, Reis’ analysts dubbed both asking and effective rent numbers as “healthy.” Specifically, both asking and effective rent growth had increased by 4.3% from Q2 2018.
Reis attributed the flat vacancy numbers to supply and housing market gyrations. “The housing market slumped in the latter half of 2018, after gaining some heat in 2017,” analysts noted. “Thus far in 2019, existing home sales have fluctuated a bit, yet at higher levels than year-end 2018.”
Additionally, analysts, in comparing year-over-year occupancy numbers, pointed out that apartment leasing accelerated in 2018, due to the 2017 Tax Cuts and Jobs Act, which “reduced the incentive to buy a home.” However, falling mortgage rates in both February and May 2019 have led to housing market spikes.
Still, Reis isn’t panicking about the flat vacancy rates, pointing out that “the apartment market has weathered the relatively strong influx of new supply very well.” While new-property stabilization is taking somewhat longer than it had been — nine to 15 months, versus the three-to-six months from 2014 — slowing construction and continued robust demand means a positive outlook for the apartment sector.
As such, the outlook is for vacancy rates to “stay well in the 4% range, or at most, rise to the low 5%s,” Reis said. However, this could change if the economy ends up contracting at any point in the next 18 months, the analysts added.
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