What’s Ahead for the U.S. Apartment Market?

The recent decline in home sales coupled with stronger apartment rent performance is creating some interesting dynamics in multifamily housing this year. A blazing hot home seller market cooled at the end of 2018 while apartment rent growth re-ignited coast to coast. Sales of existing U.S. homes ended a two-month swing of increases by taking a hit in December. Sales dropped 6.4 percent to a seasonally adjusted rate of 4.99 million, the lowest level in three years, according to the National Association of Realtors. Declines were posted in the Northeast, Midwest, South and West, and properties spent more time on the market. Higher mortgage interest rates in place earlier in the year (they have since been lowered) had an effect and sales could be stuck in neutral at least until spring because of affordability, economists say. Rising inventory to positively impact consumers NAR Chief Economist Lawrence Yun said that several consecutive months of rising inventory is good for consumers because it could lead to slower home price appreciation and lower mortgage interest rates are favorable, “but there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.” Multifamily, meanwhile, gained significant momentum in the second half of 2018. RealPage Chief Economist Greg Willett, who along with analyst Adam Couch will lead this week’s series start of webcasts that examine apartment performances and 2019 projections, says household formations are on the rise and existing renters are staying put, which favor the multifamily industry. “In contrast to the stumble seen in for-sale housing demand in recent months, the country is gaining lots of additional renters,” he said. “Job production is fueling household formation among younger adults who tend to rent, and loss of existing renters to purchase is running at levels below the historical norm.” But the industry faces the challenge of sust...