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Net Positive for the Apartment Industry

August 16, 2017 | John Salustri

Reading the tea leaves can be tricky, even for pundits. Two recent reports about apartment market performance clash a bit, but mixed together they produce a net positive for the industry. Well, at least for the short term.

In a recent report, Paul Bubny reports that “Positive demographic trends are keeping wind in the apartment market’s sails even as fundamentals are becoming spotty.” Quoting Ten-X data, the report indicates that in Q1 vacancies nationwide rose by 10 bps to 4.3%. With the addition of some 330,000 units this year, Ten-X fears that number will rise to 5% next year and just keep on going, to over 6% by 2020, especially as demand slackens in what the firm calls a “modeled economic downturn.”

Enter Marcus & Millichap, with a strikingly upbeat alternative in its most recent Research Brief. The report shows clear sailing for both single and multifamily homes. In fact, the demand for the first seems to be fueling demand for the second. “As household formation strengthens and for-sale inventory remains limited, a large share of housing demand is filtering into apartments,” it states.

Marcus reports that developers have indeed been busy, pushing out more than 86,400 units in Q2, which the company calls a 30-year record. But, significantly, it adds that “absorption also reached a new peak as over 175,600 rentals were filled.” It’s a simple case of supply and demand.

That dynamic is not about to change, at least in the short term. “Steady job gains will continue to release pent-up housing demand through the remainder of the year, and hurdles to homeownership will keep many would-be owners in rentals.”

That’s a significant differentiation in market performance between the two analytics. Ultimately, we’ll have to wait until 2020 to find out who indeed was right.

About the Author
John Salustri is editor-in-chief of Salustri Content Solutions, Inc., a consultancy focused on enhancing the web and print content of clients around the nation. He is a regular contributor to JPM Magazine and a frequent blogger for IREM’s website. Prior to launching SCS, John was founding editor of, the industry’s premier real estate news website, where he managed the daily output of 25 international reporters, and prior to that, he was editor of Real Estate Forum Magazine. John is a four-time winner of the National Association of Real Estate Editors’ Award for Excellence in Journalism.

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