Rental Households Surge, Rents Near Record High
New household formations helped spur rental apartment demand during this year’s first quarter, while rents hovered near record highs, according to an NAHB analysis of recently released U.S. Census Bureau data.
Although the number of total households declined slightly by about 200,000 during the first quarter, the downward shift was due mainly to a falloff of 800,000 in the number of home owning households. In sharp contrast, the number of renting households increased dramatically by about 600,000, NAHB economists said.
The jump takes the total number of renters in the U.S. up to 34.7 million households — higher than at any time since the fourth quarter of 1999 and within 1 million households of the all-time renter high of 35.7 million set in 1994.
The general growth in households over the past several years helps explain the first sustained increase in renter households since more than 10 years ago, according to NAHB, because newly formed households tend to be renters rather than owners.
This recent spike suggests that the rate of multifamily household formation may be on the rise again after a number of years of essentially treading water. The low interest rates, fast-appreciating home prices and availability of non-traditional mortgages during the recent housing boom helped siphon off demand that in more typical times would have gone into renting instead of homeownership.
Median asking rents reached $1,013 for rental units completed during the first quarter of 2006. Although that figure is lower than the record asking price of $1,025 set during the second quarter of 2004, it is the second-highest reading ever recorded.
Regionally, the Northeast and the West continue to have the highest median asking rents, reported at more than $1,150 in both regions. These are followed by the South, with a median asking rent of $953 and the Midwest, at $750.
Although rents are clearly highest on both coasts, NAHB economists said, median asking rent in the Midwest is near its all-time high, and the median asking rent in the South is within $13 of its highest quarterly reading ever.
Apartments Growing in Size
Because data on the asking rents of new apartments are volatile from quarter to quarter and can change direction quickly, NAHB has constructed a four-quarter moving average to more easily see trends. The calculated rents based on the moving averages show that current rents are within $14 of their all-time high.
Although some of the increase is due to local economic conditions, some may be attributed to changes in the characteristics of the multifamily rental units being produced.
New units completed in 2005 were slightly larger than their 2004 counterparts. Median square footage rose from the then record level of 1,105 square feet in 2004 to 1,143 square feet in 2005 and 1,171 square feet in 2006.
Similarly, the share of new units completed in 2005 with two or more bedrooms rose by four percentage points, to 67%, and the share with two or more bathrooms also edged up, from 49% to 54%.
For information on multifamily resources available from NAHB, e-mail Ann Marie Moriarty, or call her at 800-368-5242 x8350.