Economic growth was primarily do to job creation in the second quarter that exceeded expectations and effectively extinguished concerns about the negative reading in the first quarter. The increase in U.S. private sector and government payrolls in June, combined with favorable trends in business investment, manufacturing and service sector activity were the main factors.
The U.S. apartment market outperformed everyone’s expectations with an impressive showing in second quarter 2014. Occupancy jumped to a seven-year high, even with newly built units hitting the market in large numbers; primarily middle-markets. In addition, quarterly rent growth reached a 14-year high. Meanwhile, 56,247 units were delivered in the second quarter of 2014 alone, the most of any quarter in the past two-and-a-half years. The total number of units delivered so far this year is 102,692. The fact that occupancy has remained high in the face of increased supply coming demonstrates a still-strong apartment market.
According to IBIS, demand for the industry will remain relatively strong over the next five years as homeownership rates stay flat. Furthermore, sustained unemployment will cause consumers to rent more instead of buying. US demographic changes, particularly regarding population trends and marital rates, will likely limit demand for homeownership, supporting modest growth.
ABOUT THE AUTHOR: Eugene E. Vollucci, is the Director of The Center for Real Estate Studies, a real estate research association and author of four best selling books and many articles on apartment investing, income rentals, real estate and taxation. To purchase a subscription to Market Cycles and to learn more about the Center for Real Estate Studies, please visit our web site at http://www.calstatecompanies.com