• Zero Flux
  • Posts
  • The Five-Year Forecast for Apartment Rent Growth

The Five-Year Forecast for Apartment Rent Growth

Plus, Insights from Harvard’s Housing Report and 5 more RE Trends

Sponsored by

Reasons Why This AI Investment is Winning

RAD AI's award-winning tech is disrupting the $633B industry. 6000+ investors, including VCs, execs at Google and Amazon see its potential. $27M raised, 3X revenue growth, elite clients. Backed by Adobe Fund for Design. Invest now.

83% Subscribed, Invest Before Feb. 16th, Closing Soon.

Macro Trends

S&P CoreLogic Case-Shiller Says Home Prices Increased 5.1% link

  • U.S. home prices saw a 5.1% annual increase in November 2023, marking the end of a nine-month streak of gains. Prices edged downward from their all-time high, with Seattle and San Francisco experiencing the largest monthly declines.

  • The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported a 5.7% and 5.4% year-over-year increase for its 10-City and 20-City Composites, respectively. This indicates a significant but slowing growth trend in major urban centers.

  • November's data reflects a cooling housing market, with prices retracting to levels last seen over the summer months. This shift suggests a potential stabilization or adjustment period in the housing market following a prolonged period of gains.

Real Estate Trends

Insights from Harvard’s Housing Report link

  • Rental markets cooled in the fourth quarter of 2023, but not enough to ease affordability burdens. Apartment occupancy and rent growth softened after peaking in early 2022, yet average monthly rents remained above pre-pandemic levels.

  • A record 50% of renter households are now cost-burdened, facing increased housing instability. Eviction rates and homelessness have reached all-time highs in 2023, highlighting a significant affordability and stability crisis.

  • Despite the growing need for rental assistance, support has fallen short. The report emphasizes the necessity for continued commitment to pandemic-era relief measures to improve affordability, housing assistance, and the overall rental market.

Younger Buyers Want Baby Boomers to Update Their Homes link

  • Millennials fear inheriting homes that require major renovations, potentially worsening affordability issues. A survey reveals concerns over baby boomers passing down homes in need of updates, with 68% of boomers living in their homes for 30+ years without major renovations.

  • The housing market faces a generational divide, with boomers holding onto homes and millennials struggling with high prices and the prospect of costly renovations. This situation could lead to a crisis, straining budgets and overwhelming the home improvement industry.

  • America's aging housing stock, with a median age of 40 years, poses a looming crisis for the market. Economists warn of the impact of neglected homes on a market already facing historic inventory shortages, highlighting the need for updates to maintain sellability.

Baby Boomers Dominate Ownership of Large Homes: NY Times link

  • Baby boomers own 28% of the nation's large homes, double the rate of millennial households with children. This reflects boomers' advantage in buying during periods of lower prices and higher inventory.

  • Despite millennials outnumbering boomers, their share of large home ownership is significantly lower. The disparity highlights generational differences in home ownership capacity and preferences.

  • The financial incentive for empty nesters to downsize is low. Over half have no mortgage, making their current financial situation more appealing than facing today's high home prices and interest rates.

13 Insights for the Build-to-Rent Market Players in 2024 link

  • Owning vs. Renting Costs: In today's market, owning a home is more expensive than renting in 90% of markets, making BTR properties highly attractive due to their affordability.

  • Diversity in BTR Offerings: The BTR market now includes a wide range of products such as cottages, single-family detached and attached homes, townhomes, and hybrids, with townhomes emerging as a popular choice.

  • Multiple Success Paths in BTR: The BTR sector offers various paths to success, emphasizing the flexibility in targeting, location selection, and property types for developers.

  • Advantages of Vertical Integration: BTR companies that operate all aspects of their business under one roof can see reduced costs and complexities, providing a competitive edge.

  • Attractiveness of Educated Markets: Markets with a highly educated population, including college towns, are particularly attractive for BTR investments, offering a ready pool of potential renters.

  • Timeless Home Designs: Emphasizing timeless designs and diverse facades in BTR homes can help communities age gracefully and maintain long-term appeal.

  • Variety in Home Sizes: Offering a range of home sizes, from one to five bedrooms, can meet the diverse needs of singles, couples, and families in the BTR market.

  • BTR as an Entry to Master-Planned Communities: BTR homes within larger master-planned communities offer a unique opportunity for renters to experience the community lifestyle before potentially buying.

  • Top-Requested Amenities: Wi-Fi, coffee shops, fitness centers, and wine bars are among the top amenities desired in BTR communities, enhancing resident satisfaction.

  • Importance of Passionate Team Members: Hiring community managers who are passionate about the BTR model can significantly improve the living experience for residents.

  • Differentiating BTR Communities: Adding unique features or amenities can set a BTR community apart from competitors, attracting more residents.

  • Creating Community "Stickiness": Designing BTR communities with amenities and social programming that residents love can increase their desire to stay long-term.

  • Future-Proofing BTR Developments: As the BTR sector evolves, it's important to consider future trends and generational changes to ensure long-term relevance and success.

Something I found Interesting

The Five-Year Forecast for Apartment Rent Growth link

  • The national rent growth environment has been on a decline but is expected to improve in 2024 and accelerate in 2025, according to Markrr. December 2023 saw the US multifamily historical year-over-year rent growth at -2.1%, marking the eighth consecutive month of negative growth.

  • This trend highlights the volatility and challenges within the multifamily real estate market. Investors and property managers are keenly watching these trends for strategic planning.

  • The forecast suggests a recovery and growth phase in the coming years, signaling potential opportunities for real estate investors. This could influence investment strategies and market focus areas in the multifamily sector.

Pro Member Only Content

U.S. Homeownership & Rental Vacancy Rates Analysis Across Regions

(This content is restricted to Pro Members only. Upgrade)

  • The national vacancy rates for Q4 2023 stood at 6.6% for rental housing and 0.9% for homeowner housing. This indicates a tight housing market, especially for homeowners, suggesting that finding available properties could be challenging.

  • The homeownership rate in the U.S. for Q4 2023 was reported at 65.7%. This figure reflects the percentage of homes that are owned by their occupants, highlighting a stable rate of homeownership across the country.

  • Approximately 89.9% of housing units in the United States were occupied in Q4 2023, with 10.1% vacant. The high occupancy rate underscores a strong demand for housing, both owned and rented, in the current market.

That's all, folks. If you enjoyed today's issue, please reply (it helps with deliverability)

Cheers,

Vidit

If you are finding value, please consider helping the newsletter by becoming a paying subscriber

A subscription gets you:

✓ Content delivered 5-6 days a week

✓ Exclusive insights that are usually tucked behind paywalls (which I cover the costs for)

✓ Curated Top 10 lists

✓ The latest updates on prop-tech funding rounds

Subscribe for free to keep reading

This content is free, but you must be subscribed to Zero Flux to continue reading.

Already a subscriber?Sign In.Not now

Join the conversation

or to participate.