Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Apartment REITs: Roaring Rents

  • To read the full article, click here to read Seeking Alpha!

  • If you thought the rent was “too damn high” already, wait until your next renewal letter. Apartment rent growth reaccelerated last quarter to the highest rate since 2016.

  • It’s a good time to be a landlord yet again. All seven major apartment REITs raised 2019 same-store net operating income and FFO guidance in the second quarter.

  • Before 2019, renters actually enjoyed a brief reprieve from rising rents over the prior two years as landlords competed to fill a record number of newly completed high-end apartment units.

  • The 2010s will be remembered as a decade of historic underbuilding. Despite a US population nearly double the size of the 1960s, we produced 30% fewer housing units this decade.

  • Overregulation is at the root of the housing shortage, and there’s a risk that politically popular but economically irrational “solutions” like rent control will hurt landlords and renters alike.

Before this year, renters enjoyed a brief reprieve from rising rents over the prior two years as landlords competed to fill a record number of newly completed apartment units, particularly in the high-end luxury category. The relative "boom" in multifamily construction that began in 2014 continued into 2019, but deliveries appeared to have peaked for this cycle during the summer of 2018 at a TTM rate of roughly 365k units. Deliveries will likely hover around a range of 330k-350k through the end of 2020, which amounts to roughly 1.5% per year annual supply growth. Starts and permitting activity has pulled back since mid-2018, and as of April, multifamily starts have risen just 1.3% on a trailing twelve-month basis.

If you thought the rent was “too damn high” already, wait until your next renewal offer. Apartment rent growth reaccelerated last quarter to the highest rate since March 2016. A “perfect storm” of factors - rising wages, solid job growth, elevated mortgage rates last year, and lack of total housing supply - has rejuvenated the residential rental markets, even as multifamily supply growth remains relatively elevated. The Zillow ZRI Rent Index shows that rent growth in both the single-family and multifamily category jumped to the highest rate since 2016 despite moderating home price appreciation.

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Homebuilders, Apartments, Student Housing, Single Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Apartments, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.


Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.


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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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