By Ashley Fahey and David Purtell – Triangle Business Journalan
It’s tough to be a homebuyer in today’s housing market but it’s not easy being a renter, either.
An analysis of RealPage Inc. data by The Business Journals found, among 50 of the largest metropolitan statistical areas in the United States, rents grew more than 10 percent between the first quarter of 2020 and the third quarter of 2021. But many MSAs included in the analysis far outpaced that rate of growth.
The Triangle region ranks 12th out of 50 largest MSAs in the country in terms of apartment rental-rate growth since early 2020.
The time period used for this analysis shows how rental rates have changed since the Covid-19 pandemic. In early 2020, the multifamily industry was holding its breath, unsure if rents would be collected or what would happen to occupancy. Most secondary markets were stagnant but gateway markets, such as New York and San Francisco, suffered losses as people exited denser markets.
Then, in the second half of 2020 and into 2021, pent-up demand and relocations – some motivated by the pandemic – put the market into overdrive. In 2021 especially, apartment rental rates have been on fire, propelled by demand, new construction and emerging rental product types, such as single-family rentals, that command higher rates.
In the Triangle, average apartment rents increased 18.3 percent between Q1 2020 and Q3 of this year, jumping more than $200 from $1,173 to $1,388. That’s just behind West Palm Beach in Florida and ahead of Memphis, Tennessee. It’s also behind the Triad region, which saw an increase of 19.2 percent to $1,043. For Charlotte, where the average was $1,382 a month in Q3, the growth rate was 16.4 percent.
As rents have increased, multifamily deals in the Triangle have been heating up with some high-value sales, including a $121 million deal for an apartment community in Morrisville this month.
The Business Journals ranked 30 of the approximately 50 metro areas included in RealPage’s data to determine which areas are seeing faster-than-average rates of rental growth. There likely won’t be a lot of surprises, especially at the top of the list, but the rate of growth for some is eye-popping — more than 20 percent in some markets.
Rental-rate growth is expected to continue in Q4 and into early 2022 but multifamily industry executives say the current pace of growth isn’t sustainable. As we head into 2022, it’ll be interesting to see what kind of growth we’ll see, especially in the hot Sun Belt cities that see dozens, if not 100-plus, people move to those metro areas by the day.
The challenges in the rental market today also prompts a bigger question about affordability and displacement.
Among the 50 MSAs tracked by RealPage, seven had average rental rates that were below $1,000 per month in Q1 2020. Today, not a single market among the 50 is below $1,043 per month.
You’ll also note that some of the top markets for growth in apartment rents also rank among the hottest housing markets, as you can see in the gallery below.
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