The apartment markets that were hurt the most by the housing crash are now experiencing steady growth.
“All of these markets now are posting very healthy job growth that is helping to stimulate solid demand for apartments,” says Greg Willett, chief economist for RealPage Inc., a provider of property management software solutions.
As moving trucks continue to head South, populations in towns across the Sun Belt are growing—and apartment rents are rising.
“If demographics are on a market’s side—rapid population growth, with jobs being created—then it’s no surprise that these markets are reclaiming top spots in various rankings,” says Victor Calanog, chief economist and senior vice president for New York City-based research firm Reis Inc. We look at the apartment markets that have recovered the most from the impact of the housing crash.
“Las Vegas suffered the most during the downturn by a wide margin,” says Willett, looking at the largest 50 U.S. metropolitan areas. Apartment rents fell an average of 19.6 percent from their pre-recession peak. They have now increased by 16.3 percent since hitting bottom.
“This is the only spot where today’s pricing isn’t quite back to the last cycle’s highs,” says Willett. “That hole will get filled-in very quickly, however, since pricing now is climbing at an annual pace of 6.4 percent.”
The largest metro area in Arizona became famous for overbuilding. Average rents fell 14.0 percent during the downturn, making Phoenix number two on MPF’s list of apartment markets most hurt by the crash. Since then, rents have bounced back with growth of 25.3 percent.
“Pricing now is well above the earlier peaks,” says Willett. Rents are currently growing at a rate of 7.3 percent per year, according to MPF.
California’s Inland Empire
Apartment rents in the Inland Empire of California are also much higher than they were before the housing crash. Rents fell 9.5 percent—and have risen 25.3 percent since they hit bottom, according to MPF.
“If anything, given the relative affordability of housing both on the for-sale and rental side, these ‘housing crash’ markets may well have a longer runway to extend rent and occupancy gains,” says Calanog. “In contrast, we are already seeing negative rent growth for higher rent markets like San Francisco, despite the relative health of the tech sector.”
Atlanta is another quickly-growing city savaged by the housing crash. Rents for apartments in Atlanta fell 9.3 percent, making it number four on the MPF list of the markets hurt most by the housing crash. Since then, average rents in the city have risen by 25.3 percent.
Developers here may be taking too much advantage of the recovery, however. In a few Atlanta neighborhoods, new apartment construction equals or exceeds the last cycle’s peaks, according to Willet.
Apartment rents in Orlando dropped 9.0 percent on average during the crash. Many other places in Florida suffered similar losses.
Since the recovery, however, apartment rents have risen 23.7 percent, according to MPF.
Overall, ‘housing crash’ markets like Orlando are not yet overbuilt with new apartments.
“Construction starts are on the upswing, sometimes in a big way,” says Willett. “But completions generally haven’t gotten back to previous highs yet.”
The California state capital was also deeply hurt by the housing crash—though not quite badly enough to make MPF’s list. Since then, Sacramento has fully recovered.
“Sacramento marked six straight months as the market with the highest annual effective rent growth,” according to a report on the top 50 apartment markets by data firm Axiometrics. Effective rents grew 11.6 percent over the 12-month period ended in August.