Apartment Markets with the Worst Supply/Demand Imbalances

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“Life's battles don't always go to the stronger or faster man,

But sooner or later, the man who wins is the man who thinks he can!”

― Napoleon Hill

Apartment Markets with the Worst Supply/Demand Imbalances link

• The first quarter of 2024 revealed significant imbalances in some of the U.S.'s largest apartment markets. New York, for instance, saw a dramatic mismatch with nearly 2,500 new units facing over 2,000 move-outs.

• Texas showed strong apartment demand, particularly in Dallas, Austin, and Houston, yet couldn't keep pace with even larger supplies. This supply-demand mismatch dampened potential gains in these bustling markets.

• Other notable cities like Minneapolis and Fort Worth also experienced substantial new supply that outstripped demand. Despite respectable demand levels, the influx of new units prevented any notable improvement in occupancy rates.

Why Is Their A Big 1st Quarter Apartment Demand link

• The U.S. apartment market saw a significant jump in demand in the first quarter of 2024, with absorption reaching over 103,800 units. This is more than double the figures from the previous quarter, marking a robust return to seasonal norms after the pandemic's impact.

• Historically, the first quarter is not the peak absorption period, yet 2024 started with numbers far exceeding the decade's average. This unusual surge suggests a potentially strong year ahead for the apartment market, especially given five consecutive quarters of positive demand.

• Major markets like Seattle, Dallas, Austin, and Las Vegas experienced notable increases in apartment demand. In contrast, large gateway cities such as New York, Newark, and Los Angeles saw declines, indicating varying regional dynamics within the U.S. apartment market.

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Study - High Mortgage Rates Are Fueling Strong Inventory Growth link

• Mortgage rates have risen significantly, currently standing over 7.2%, driving a substantial increase in home inventory. Inventory of unsold homes is 30% greater than last year and more than double compared to April 2022, signaling a growing availability amidst high rates.

• The number of new listings surged with 67,000 new unsold listings this week, marking a 32% increase over the same week last year. Despite higher rates potentially locking in current homeowners, 2024 is witnessing a consistent rise in new sellers, countering the expected trend.

• Sales are still outpacing last year, with new pendings up 10% from a year ago, despite high mortgage rates. If rates stabilize, market activity could increase; however, ongoing hikes could further dampen buyer enthusiasm and necessitate price adjustments.

Multifamily Sees its Strongest Performance in 20 months link

• Rents in the U.S. experienced the strongest gain in 20 months, increasing by $8 to $1,721 in March, marking a 0.9% year-over-year rise. This spike represents the largest rent increase since the onset of the COVID-19 pandemic, indicating a return to normal seasonal patterns.

• Despite economic challenges, multifamily housing markets show signs of robust growth, with some regions like Orlando and Charlotte seeing rents climb by over 1.3% in March. Major cities like New York and Columbus outperformed others, with year-over-year rent increases of up to 5%.

• The national occupancy rate has slightly dipped to 94.5%, reflecting broader market adjustments. However, certain areas like San Francisco saw minor improvements, highlighting regional disparities in the recovery of the rental market.

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That's all, folks.

Cheers,

Vidit

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