Demand for rental apartments is booming as more Americans either can’t or don’t want to buy their own home, according to participants at the Bloomberg Commercial Real Estate Summit in New York.
“This is the apartment’s moment, and it’s likely to be a long-lasting moment,” said Susan Wachter, professor of real estate and finance at the University of Pennsylvania’s Wharton School. To buy homes, people face “credit constraints or they’re nervous and waiting on the sidelines,” she said.
The average monthly effective rent -- what renters pay after landlord giveaways are included -- rose to $1,004 in the third quarter from $981 from a year earlier, research firm Reis Inc. said last month. In comparison, the median price for a U.S. existing home in the same period dropped 2.2 percent to $166,400, according to the National Association of Realtors.
Foreclosures are helping to boost rental demand as displaced families with damaged credit ratings search for new homes, said Thomas Shapiro, president and portfolio manager at GTIS Partners.
“There are so many places where people have impaired credit, it’s going to be a long time before they can buy houses,” Shapiro said at the conference.
Apartment Vacancies Fall
The share of U.S. apartments that were vacant in the third quarter dropped to 5.6 percent, a five-year low, from 7.1 percent a year earlier, according to New York-based Reis. Developers broke ground on 227,000 homes in multi-unit buildings in September, the most in three years, according to the Commerce Department.
“The beginning of the rentership society is upon us,” Morgan Stanley said in a research report for clients last month.
Manhattan apartment rents increased to $2,970 a month in the third quarter, according to a report last month by appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. That’s almost triple the U.S. average. New leases declined 6.9 percent to 7,998 and the number of listings on the market dropped 1.9 percent to 4,605 as tenants decided to stay put rather than compete for units.