A combination of outsize demand for housing and an acute lack of rooftops is driving up apartment rents, according to a new CoStar analysis.
In the third quarter, the national multifamily market experienced record-setting rent growth in both urban and suburban areas, Jay Lybik, national director of multifamily analytics for CoStar Group, said in a video presentation. The Sun Belt and Southwest are fueling the growth, with nine of the top 10 markets located in those regions, according to the analysis.
“The apartment market has never seen such widespread double-digit rent growth numbers in history,” Lybik said.
The trend is being spurred by a shortage of available single-family homes and apartment buildings, which are difficult to build right now given supply chain disruptions in the lumber and steel industries, among other factors.
“With demand outpacing the supply of newly delivered units, market conditions appear ripe for continued upward pressure on rents,” Lybik said.
The nation is still not producing enough places to live, according to the analysis. Developers are on pace to add 1.5 million housing units in 2021, but on average, they need to be building at least 1.8 million units per year to keep up with demand. New homes are also needed to account for housing units removed from the market because of natural disasters, demolition and obsolescence.
This strong demand has led to high volumes of search activity on Apartments.com, the online service owned by CoStar. This year’s search activity is trending above 2020 levels.
And all that searching is translating into record-high demand. So far in 2021, more than 600,000 apartment units have been rented, pushing the national vacancy rate to an all-time low of 4.5%, according to the analysis.