Strong Demand for Apartments – 2011

Posted August 18, 2011

$15 billion in sales for the second quarter, still a fraction of the peak back in 2007, brought the first half total to $24.5 billion according to CoStar Group data.

Average price per unit $88,500 for the quarter and that’s the highest since third quarter 2008 according to Michael Cohen, CoStar’s Global Strategist.

Top coastal markets continue to dominate sales volume in the first two quarters of 2011 with Washington DC with $2.6 billion in sales, Los Angeles with $2.3 billion, and San Francisco with $2.1 billion. Atlanta and Phoenix also rang up $1.3 billion.

Average cap rates have fallen to slightly below 7% with prime markets down to 5.7%.

Strong renter demand coming from displaced former home owners and not job growth is driving down vacancy rates. Plus very little new supply is coming into the market. CoStar estimates that only 30,000 new units in the 54 largest US markets are coming online for 2011. However, 70,000 starts in the first two quarters of 2011 suggest that we’ll see an uptick in supply for 2012 and beyond. Construction financing is still very difficult to obtain so that’s primarily what’s constraining new construction. If we ever get some new job growth we could see a tight market for years to come.

CoStar News – Strong Demand Tight Supply Strengthen Case for New Apartment Development

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