The increase in the number of households combined with rises in house prices have led to greater occupancy in US rental apartments. A survey for Q3 2018 reveals the highest take-up of rentals since 2001 and that renting a property is cheaper than buying.
The latest quarterly report on national trends for US rental apartments published by Berkadia concludes that demand remains higher than supply across the country. It also reveals that three locations in Florida are the nation’s top rental growth markets.
Rental demand higher than supply
Berkadia finds that multi-family rentals (apartments) reached an occupancy of 95.6% in Q3. While this is only slightly higher than the same quarter last year, it ranks as the highest rate since 2001.
Locations showing the highest occupancy of US rental apartments include Minneapolis-St Paul and Los Angeles South, both with 97.1% occupancy. Knoxville, Ventura County and New York all have rates in excess of 96.6% and make up the remaining five. The near-full occupancy comes about despite high delivery of new apartments this year. And as the graphic below clearly illustrates, demand runs far ahead of supply.
In the year to Q3, some 228,552 new units entered the US rental apartment market. However, take-up reached 297,257, well ahead of new supply.
Cheaper to rent than buy
A fundamental reason behind the strong demand for rentals in the US comes from ever-increasing house prices. Monthly rental rates went up too and averaged at US$1,334 across the country in Q3, a 2.9% rise on the same period in 2017.
However, despite increases in both house prices and rental rates, the imbalance remains. According to Berkadia calculations, the rate is US$240 less a month than the equivalent mortgage. Recent hikes in mortgage rates in October will push monthly repayments higher and in turn, make US rental apartments even more attractive to would-be homeowners.
Florida rental property best
The Berkadia report also looks at the top rental growth markets in the US. Florida metros dominate the listing, occupying 3 out of the top 10 positions. Orlando takes first place as the best place for US rental apartments. Rental rates rose by 6.9% in the year to Q3 in Florida’s theme park capital, the highest rise in the country.
“As for investors and value, the market continues to be bullish on Orlando,” said GlobeSt.com in its report. It quoted Cole Whitaker from Berkadia’s Orlando office as saying that he “does not expect that to change any time soon”.
Jacksonville sits just behind Orlando as the fifth best market in the US for rental apartments. In this metro, rental rates rose by 4.9% year-on-year. Tampa completed the Florida hat-trick with a 4.7% rise in monthly rentals. The main reason behind the increase comes from the strong job creation in many metros. Orlando along with Colorado Springs registered over 4% more employment in Q3 2018 than the previous year, the highest in the country.