One of my megatrends this and last year in real estate is the continued strong growth in residential rental markets compared to owner-occupied housing. There is going to be at least a decade of people that will be renters, which just a few years ago, would have been homeowners.
Consider the trifecta of impacts on want-to-be homeowners: increased down payments (Qualified Mortgages), increased scrutiny on borrowers for conventional loans (higher hurdle rates to qualify for conventional loans), and the material impact of many 20- and 30-something’s college loans (they messed-up their balance sheets). Simple math dictates a growing pool of renters.
So where are the top apartment rental markets in the country? To address this, SquareFoot (a self-storage company), analyzed the top 100 metro markets and condensed them to a top-10 list. They blended Census data, economic numbers, population, vacancy/occupancy info and spending to arrive at their top-10 apartment boomtowns. Also included was new deliveries of apartments in the supply pipeline.
So who are the winners according to SquareFoot? They are listed below. I have included the number of net new jobs added in the prior 12 months (thousands) and percent year-over-year job growth rate.
When I look at this list, the one that strikes me as not a contender is Dayton Ohio. Perhaps the growth rate of renters arises from a declining job-base. The remaining top-10 markets are creating jobs at close to double the U.S. job growth rate.
Reply to the blog if you have a perspective on Dayton.
In that past, we have learned that, in the long-run, overbuilding is really easy. But perhaps not now at the current phase of the cycle. No doubt that down the line we will see markets once again in an over-supply mode. Not now (except perhaps Washington, D.C.) since most now are growing well.