TLDR:

1. Do new developments impact Class C rents? Yes.

2. Realpage’s November Apartment Fundamentals

3. Buy or rent? Renting is historically more affordable than buying.

4. Industry news articles

Class C Rents

Analysis: Class C rents have experienced the steepest declines in markets where the supply rate exceeds the national average. Essentially, this demonstrates the expected effect of increased apartment construction. Higher-income renters are likely drawn to the (more expensive) new apartments, freeing up moderately priced Class B units. This, in turn, puts downward pressure on rents to attract Class C renters, creating a cascading effect throughout the market.

“We don’t need more luxury apartments!”

Actually, yes, we do. When we build “luxury” apartments at scale, rents at all price points are pushed downward. This makes a strong case for mitigating the accessible housing issue across America.

Apartment Fundamentals - Realpage

Analysis: Rent rates are mostly flat and even regressing in some areas. Occupancy has shown some resilience in most regions, but the South has been hit the hardest. The expansion in vacancy rates seems to be tied to the national oversupply of apartment units.

The “tail” of the new development boom of 2021 and 2022 is hitting markets across the country.

Rent vs. Buy

Analysis: The premium to buy has surged to over $1,000/month in recent years, driven by rising mortgage rates, home prices, and maintenance costs. This makes renting a more affordable option for many households. For most of the timeline, the cost difference between renting and buying hovered around or below $0, reflecting a balance or even favorability toward ownership. The recent spike indicates a sharp deviation, likely driving more people toward renting.

Although population growth seems to be the historical driver of rent rates and occupancy, this rent vs. buy trend is something to watch as markets absorb new inventory.

Industry News

• Link: Brookfield buys a $845M portfolio from Blackstone at $203,958 per unit.

• Link: Greystar will open its first U.S. modular project for apartment projects.

• Link: Thousands of units left empty in NYC amid housing crisis.

Thanks for reading. Feel free to share with others!

Sincerely,

Brent Zomer