Apartment REITs: Rents Rising, Again
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- Apartment REITs delivered another solid year in 2018. Fundamentals improved throughout the year as strong rental demand more than offset peaking supply growth.
- 'Renter Nation' is alive and well. Rising mortgage rates and tax reform have led to softening demand at the margins for homeownership, offset by strengthening demand for rentals.
- For apartment renters, the modest relief from rising rents was short-lived. Leasing metrics improved throughout 2018, particularly new leases, which were up nearly 150 bps from last year.
- Turnover rates remain near record lows as renter satisfaction remains very high. Low turnover has kept expense growth in-check despite pressure from rising property taxes.
- Supply growth appears to have peaked in mid-2018 but will remain elevated in 2019 before pulling back in 2020. Rent growth is likely to rise above the rate of inflation well into the next decade.