Demand for brand new condo leases has “all however evaporated” as client confidence stays low and inflation continues to rise, in accordance with the newest information from RealPage.
In different phrases, say farewell to the times of record-high family formations.
“We’ve by no means earlier than seen a interval like this – weak demand for all sorts of housing regardless of strong job progress and sizable wage features,” RealPage Chief Economist Jay Parsons mentioned. “It wasn’t simply condo demand that shot up in 2021 and plunged in 2022. The identical sample performed out to various levels in different leases and in for-sale houses.”
Parsons and his colleagues additionally be aware that “whereas some pundits have recommended demand is slowing attributable to affordability challenges, there’s not but any proof that’s true throughout the professionally managed, market-rate condo market,” including that turnover, whereas normalizing, continues to be low and almost 96% of renters have been paying on time as of November 2022.
As well as, “there’s no indication renters are doubling as much as any vital diploma,” RealPage analysts say. “That will happen later, however because the publicly traded condo REITs all reported of their final earnings name, it’s not a significant factor but.” What’s extra, “there’s no “’flight to affordability’ –that means that renters aren’t shifting down from extra costly models or markets into extra reasonably priced models or markets,” in accordance with RealPage. “The drop in demand got here throughout all worth factors and in primarily all markets.”
In response to Parsons, the trigger is client confidence.
“Low client confidence means many American households really feel nervous and unsure, and that has a freezing impact on family formation and housing demand,” Parsons mentioned. “Human nature is that after we really feel unsure, we’re more likely to remain put – and that’s what occurred in 2022.”
Rents for brand new flats fell in December for the fourth consecutive month, declining by 0.4%. Hire have dropped by a cumulative 1.6% since September, in accordance with RealPage. The deepest hire cuts have been in tech-heavy markets like Austin, San Jose and Raleigh/Durham, in addition to cities like Las Vegas, Phoenix and Sacramento, which all benefited from robust pandemic-era in-migration developments.
