The multifamily sector is in good shape for the foreseeable future, according to Calvin Schnure, NAREIT's vice president of research and industry information, despite some market concerns about a rebound in new construction. He pointed out that there are approximately 3 million households that have "doubled up" since 2008, and many of those residents will be looking for a place of their own as the job market improves.
The vacancy rate for apartments fell 60 basis points in the first quarter, to 8.8 percent. Schnure said that's down more than 2 percentage points from its 2009 peak. Additionally, he said that in the first quarter alone, the number of occupied apartments jumped 8 percent, the strongest growth in demand for rental apartments since 1993.
"So we're seeing that the apartment sector still has quite a bit of momentum," he explained.
These doubled-up households will support rental demand going forward, according to Schnure. "A lot of the growth we saw in rental occupancy in the first quarter was some of these people who may have benefitted from the improving job market and were coming out signing leases."
He added that the doubled-up households currently represent enough pent-up demand to soak up most of any excess supply in the market.
"As the job market improves and the overall economy improves, these millions of households that are doubled up currently are going to be looking for some place to live. That's going to give the apartment sector legs for quite a while," Schnure said.
This contrasts with growing concerns in some corners that the sector may run out of steam, according to Schnure, who noted that apartment REITs have performed well over the past two years.
Schnure said new construction housing is at low levels, especially when compared to what will be needed to satisfy demand. Multifamily housing starts trended over 300,000 annually in the decade before the financial crisis. Despite the recent pick-up in construction, they have yet to return to that level since the economic slowdown.
"It's going to take a lot more construction to make up the half million units in shortfall and get to any point where supply is an aggregate concern," he said.