In stark contrast to the single-family residential sector, which is suffering from its worst downturn since the Great Depression and a 10-month backlog of supply, conditions in the apartment sector remains strong, according to the National Multi Housing Council’s latest Market Trends report.

"Apartment owners exercised great restraint during the housing boom," NMHC Chief Economist Mark Obrinsky said in a prepared statement. "As a result, they have escaped the oversupply problems plaguing the single-family sector."

Last year, the number of renters in professionally managed apartments increased by the largest amount since 2000, according to the report. In fact, the increase was as large as that for the previous five years combined. Prior to that, between 2004 and 2006, 1.2 million households joined the ranks of renters, more than making up for the loss in renter households sustained from 2002 to 2004.

"While the so-called ‘shadow’ rental market (unsold houses and condos that have left the for-sale market to enter the rental market) may attract some apartment renters," Obrinsky said, "thus far, the lowest home-ownership rate in almost seven years seems to have increased demand for apartment residences, especially professionally managed apartments."

The number of renters nationwide is projected to increase by almost 4 million households over the next 10 years, with half of those households likely to rent apartments. To meet that demand, the nation needs to produce at least 250,000 new apartment residences each year. Yet apartment completions have averaged just two-thirds of that in recent years. Last year, both starts and completions of all multifamily units (both condos and rental apartments) fell to their lowest levels since 1996 and 1997, respectively.

"By all measures, new apartment supply clearly remains in check," Obrinsky said. "Thanks to those solid fundamentals, rents continue to show modest increases even as single-family house prices continue to fall."

Rents for professionally managed apartments tracked by M/PF YieldStar rose by 3.5 percent in the fourth quarter of 2007, a pickup from the 2.9 percent increase of the previous two quarters. Apartment vacancy rates have changed little over the last five quarters and are at exactly the same level as a year ago.

According to Obrinsky: "Apartments continue to be an investor favorite. And rightly so. ‘Real’ returns (that is, returns over and above the rate of inflation) to privately held apartments have averaged almost 11 percent over the last five years.

"The outlook for the apartment industry going forward is very strong. The long-term demographics are quite favorable for rental housing. The nation’s 75 million echo boomers are already entering the housing market, and most begin as renters. Strong immigration levels add even more demand for rental housing."

Washington, D.C.-based NMHC is a national association representing the interests of the larger and most prominent apartment firms in the United States, including owners, developers, managers and financiers.


What’s your opinion? Leave your comments below or send a
letter to the editor.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Real estate news and analysis that gives you the inside track. Subscribe to Inman Select for 50% off.SUBSCRIBE NOW×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription