Multifamily has fared better than other asset classes in the pandemic but there is little doubt the category suffered some blows from the economic and health crises that swept the US. We’ve gone into the weeds coving some of these developments, but it is also useful to step back and take a broader view of how much the industry changed this year. A new report from RENTCafé touches on these trends.
Peaking Leasing Season
COVID-19 interrupted the apartment industry’s peak leasing, cutting rental activity by 10% in 2020.
In most years, peak leasing season begins in March and runs until August. But, in 2020, COVID-19 pushed the peak leasing back to May, which had a 27% increase in renter activity. The pandemic also cut the moving season short. By July, renter movement dropped 13%. In the previous years, rent accelerated 23% by March and slowed down by 9% in August, according to RENTCafé.
Gen Z Moves to the Forefront
In an otherwise tumultuous year, the makeup of the renter cohort moving also shifted. Millennials still represented the largest group of renters on the move at 47%. However, in the past two years, they represented more than half of renting activity.
The real movement occurred after millennials. Gen Z replaced Gen X as the second most active renter cohort in 2020. Gen Z represents 23% of movement after only constituting 12% two years ago. Gen X is now 18% of renter movement, which is a decrease from 20% in 2018, according to RENTCafé.
No Income Gains
COVID also stopped income gains renters have enjoyed in recent years. After rising for two years, renters’ median income only stayed at around $38,400, the same as in 2019. In 2018, renter incomes increased 1.5% to $36,552, while they jumped 5.1%, to $38,400 in 2019.
An Urban Exodus
Another hallmark of the pandemic has been the exodus of renters from urban areas. Like many other firms, RENTCafé noted that trend. It said that 18 of the 30 largest US cities saw more renters leaving compared to 2019. Additionally, half of the largest cities registered a noticeable difference in the number of renters moving out of the city rather than renters moving in.
Detroit experienced a 35.7% increase in renters moving out since last year, as well as a 13% drop in renters moving in. That move out rate was the fastest rise of all US cities. Oklahoma City followed with 34.2% more renters leaving the city in 2020, and 3.5% fewer moved in. New York came in third with a 25.1% increase of renters moving out, according to RENTCafé.
Rent Declines
Overall, rents decreased in all top 10 most expensive cities for renters in 2020. San Francisco saw the largest decline, with average rent plummeting to $3,055 after a 17.3% yearly drop. Manhattan, New York ($3,761) was second with a 10.8% rent decrease. That pushed its average rate below the $4,000 mark for the first time in years. Coming in third was Seattle, which saw prices drop 8.5%, according to RENTCafé.
RENTCafé isn’t alone in pointing out the struggles in New York and San Francisco. “The markets that are going to struggle are very tourist-driven or the urban cores, like downtown San Francisco and downtown Manhattan,” says Sam Isaacson, president of Walker & Dunlop Investment Partners told GlobeSt.com in an earlier interview. “It’s going to be soft.”