OWNER LOGIN     TENANT LOGIN        
× Search

 

 

 

Property Management Blog

 
     

How Demographic Changes Have Impacted the Apartment Market

Dec 20 2016

How Demographic Changes Have Impacted the Apartment Market


Few dispute the notion that demographics drive the apartment market. When looking at demand, the most fundamental statistics that analysts consider include population, household formation and employment. While these statistics tend to move hand in hand, sometimes patterns emerge that show a chasm in these numbers, and demographers are keen to report how these chasms may explain more about the underlying apartment fundamentals than the more macro trends.

One of the more interesting findings in this expansion can be found in the demographic statistics. Data on households shows that non-family households have grown at a disproportionately faster rate than family households. Non-family households include singles, roommates and any kind of cohabitation arrangement that does not include marriage or children. The graph below clearly shows that this divergence started when the housing market collapsed, but it continued throughout the subsequent eight years. This chart illustrates the common notion that Millennials have put off starting a family and buying a home. It also explains why the apartment market has thrived over the last 10 years, expanding by 12 percent from 2007 to 2016.

Looking at the metros shows a somewhat consistent pattern: those with the highest non-family household growth had some of the highest occupancy growth rates. These include Austin, Greensboro/Winston-Salem, N.C., Houston, San Antonio and Charlotte, N.C. Apartment occupancy in these metros grew by 20 percent or more from 2007 through 2015. However, these metros saw high overall growth rates in population and households as well, so occupancy growth was not necessarily driven by the non-family household growth trend.

The question that then emerges is: do metros that have disproportionately higher growth in non-family households show strong rent and/or occupancy growth patterns? The data suggests that the answer to this question is no. The two North Carolina metros—Charlotte and Greensboro/Winston-Salem—both have disproportionately higher non-family household growth than family household growth rates, as well as high occupancy growth. Charlotte’s rent growth was just above the U.S. average, but Greensboro’s rent growth is below the U.S. average rate. Moreover, other metros with wide gaps between non-family household and family household growth rates include Birmingham, Ala., New Haven, Conn., New Orleans, Wichita, Wis. and Richmond, Va.—none of which have posted strong apartment rent growth rates.

Looking at the correlation coefficients between non-family household growth by metro, along with occupancy growth and rent growth indeed shows that non-family household growth and occupancy growth have a correlation of 57 percent which is high but not conclusive. The correlation between rent growth and non-family household growth is only 20 percent. Taking a quick look at employment statistics shows that the correlation coefficient between employment and apartment occupancy growth is 55 percent, but the coefficient between employment growth and rent growth is 70 percent. San Francisco, Seattle, San Jose, Portland and Denver saw the highest rent growth from 2007 to 2015, largely due to tech-focused industries, but there was little to no gap between non-family and family household growth in these metros.

Thus, one could conclude that rents are driven more by economics—job and income growth—than demographics, which still drives occupancy. In short, the demographic shift that we have seen these last few years—fewer families and more “non-families” has changed the urban landscape dramatically. Nevertheless, the property markets are still ruled by economics, which may or may not move in step with the demographic changes.

Blog Archives

Blog Categories

Blog List

Apartment Management
 Web Master
 9  73  12/20/2016
Association Management
 Web Master
 4  13  2/23/2010
Commercial Property
 Web Master
 3  10  8/15/2014
Home Improvement
 Web Master
 3  0  3/11/2010
Homewatch Services
 Web Master
 3  6  5/25/2009
Onyx Management news.
 Web Master
 21  74  11/23/2017
Landlord KnowledgeBase
 Web Master
 24  66  5/18/2017
Property Maintenance
 Web Master
 13  52  3/20/2017
Property Management
 Web Master
 38  55  6/24/2017
Property Management
 Web Master
 29  46  4/22/2017
Real Estate Investment
 Web Master
 28  78  6/10/2017
Rental Property
 Web Master
 50  185  8/27/2017
Tenant Relations
 Web Master
 35  206  9/3/2017

Tag Cloud

Terms Of Use Privacy Statement Copyright 2006-2018 by Onyx Management Group, Inc.