Miami Beach, Florida: Colorful pastel green house apartment building for rent – Courtesy: Shutterstock – Image by Kristi Blokhin
The majority of rent price increases last month were in college towns, energy industry towns, Midwest and Northeast cities, while rent growth in the Sunbelt, which skyrocketed during the epidemic, fell further victim to a large wave of building.
The top two smaller cities on the list are both Texas cities, Midland and Odessa. According to analysis by Dallas-area apartment software company RealPage, new apartment leases saw a 13.8 percent increase in rent last month compared to the same month previous year. The cities with oil drilling rival Florida cities’ double-digit rent growth from 2021 through last year. With an 8.8 percent increase, Madison, Wisconsin, the location of the main campus of the University of Wisconsin, came in second to Midland/Odessa.
Due to the extremely high demand for apartments, rent prices did not increase in the smaller markets. They had sufficient economic activity to fill apartments faster than they could be built. No market has a sizable pipeline of new apartment development to slow the rise in rents.
Carl Whitaker, head of research and analysis at RealPage, stated in an online presentation on market circumstances last week that “it’s really more of an absence of supply story.”
Of the 20 cities RealPage analyzed, New Haven, Connecticut, had the lowest year-over-year rise at 4 percent. However, that outperformed significant locations like Miami, which experienced 1.2 percent growth in September, and Orlando, where asking rents fell 2.4 percent from a year earlier, per the most recent report from Apartments.com. In late 2021 and early last year, both cities had the highest double-digit rent increase rates in the nation.
Large Sun Belt areas, namely in Florida, Texas, North Carolina, South Carolina, Tennessee, and Georgia, experienced explosive job and population expansion over the previous few years. Existing apartment supply was unable to meet demand.
Following the underwhelming 2022, there has been an overall uptick in demand for apartments across the nation through the first nine months of this year. During the presentation, Jay Parson, the chief economist at RealPage, stated that “we’re seeing that people are starting to feel better about the state of the world and their position in it.”
Slowing inflation has been a significant factor. The Conference Board’s consumer confidence index reached a two-year high in July, while rising gas and grocery prices have since caused a little decline.
The amount of new supply that will be available after building reaches historical levels in 2022, however, is still much below the resurrected demand. Construction start-ups have halted due to higher loan rates. Demand growth could cause the supply and demand imbalance to close between now and 2025.
Similar Yet Distinct
Numerous markets around the nation have experienced job growth, albeit to varied degrees.
There are no housing units being built in Midland/Odessa. But with oil costs rising, there is currently a need for apartments. When oil prices are high, the oil and gas industry creates jobs, and when oil prices are low, those jobs are eliminated.
Sam Tenenbaum, a Cushman & Wakefield economist based in Austin, Texas, remarked in an interview that “it’s a perfect case study for economics.” Its rental market is reportedly one of the most unstable in the nation.
Prior to the epidemic in 2018, when the oil and gas industry was growing, rent increase was higher. After the oil price collapse, the pandemic severely damaged rents.
Because of the climate, a business-friendly atmosphere, and the absence of a state income tax, South Florida attracted many jobs from the Northeast and Midwest.
According to Cushman & Wakefield, Miami has 31,631 apartment units under development, representing 26 percent of the city’s 120,317 total existing units. Another strong apartment market, Austin, Texas, has 41,972 units under construction, or 15.7 percent of all units currently on the market.
The data provided by Cushman & Wakefield pertains to apartment buildings with 50 units or more, which are typically regarded as investment-grade properties. Other sources comprise all apartment buildings with fewer than 50 units. Apartments under construction are generally, if not always, of investment grade.
Large construction pipelines are often followed by higher vacancy rates. For the third quarter, Austin’s vacancy rate, which has been increasing for more than a year, is roughly 10%. Due to this, asking rents decreased 4.8 percent year over year in the most significant way among the 40 major cities that Apartments.com tracked last month. After reaching historic lows during the pandemic, Miami has increased to 6.5 percent.
In contrast, Madison’s most recent apartment market report from brokerage company Cushman & Wakefield shows 2,593 units under construction, or approximately 4.4% of the city’s total of 57,288 existing apartments. There has been some job growth in Madison.
According to Cushman & Wakefield, Madison’s vacancy rate for the third quarter was 3.5 percent. Because there hasn’t been much construction, it has been increasing more slowly. The metro’s employment growth has been going upward for a while, but in 2021 it will surpass pre-pandemic levels. The unemployment rate fell to 1.6 percent in April, its lowest level in a decade, but it increased to roughly 3 percent in August, still much below the 3.8 percent national average.
The University of Wisconsin system’s biggest campus is located in the city. The local apartment supply is under pressure due to this year’s fall enrollment, which was 50,255 students, which is 1.3 percent more than last year.
There is a lack of student accommodation, but more private construction is planned. According to Atlanta-based student housing analytics company College House, developers have 4,480 beds coming online, ranking it eighth in the nation for supply.
In College Station, Texas, home to Texas A&M, Lexington, Kentucky, Champaign-Urbana, Illinois, Fayetteville, Arkansas, and Lincoln, Nebraska, the University of Arkansas and the University of Illinois all experienced similar dynamics.
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Born and raised in South Florida, Krystal is a recent graduate from the University of Miami with professional writing experience at the collegiate and national news outlet levels. She’s a foodie who loves all things travel, the beach, & visiting new places throughout Florida.