The average price for apartment properties in the United States climbed to 34 per cent above the 2007 pre-financial-collapse peak last year, while the average price per unit hit USD $131,233, or more than 40 per cent higher than the 2007 peak price. Among property sectors, a sales volume of USD $98.3 billion in the first three quarters of 2015 trailed $108.5 billion in office deals, but was well ahead industrial, retail and hotel transactions.
Real estate analysts now predict another solid year for 2016, but advise that the prolonged upward trajectory of apartment rents and value is likely soon to flatten. A recently released annual forecast from the National Association of Realtors, Situs and Deloitte, Expectations & Market Realities in Real Estate 2016, projects the U.S. national vacancy rate will drop to a low of 4.9 per cent early this year before rising back up to 5.4 per cent with an influx of new supply onto the market.
More than one million new apartment units are expected to be added in the 2015-2017 period, with approximately 342,000 completed last year and 380,000 scheduled for 2016. This compares to approximately 400,000 units built from 2010 to 2012, and demonstrates developers’ active response to strong market fundamentals.
Challenges in other areas of the economy have been less pronounced in the apartment sector as fewer tenants make the move to homeownership or, as was particularly the case following the U.S. sub-prime mortgage crisis, homeowners return to rental accommodations. The U.S. homeownership rate has now dropped below 64 per cent, five per cent lower than in 2004, while less than 36 per cent of households under the age of 35 own homes, down from 43.6 per cent in 2004.
While continued economic recovery should drive more homeownership, analysts suggest vacated rental units will be easily filled. “Pent up demand from the younger demographic, many of whom have been living with their parents or have been doubling up, will continue to maintain positive demand in the short-term,” the NAR, Situs, Deloitte report projects.
New York City, Los Angeles, Dallas and Atlanta racked up the highest sales volumes tallies in 2015, but year-over-year growth of more than 150 per cent was registered in Orlando and Broward County, Florida, Inland Empire in southern California and Minneapolis. Meanwhile the Situs RERC Value vs. Price Index ranks San Antonio, Austin, Tampa, Dallas and Orlando as the five markets currently offering the best investment value.