This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apartment Demand Ebbs as 'Avalanche' of New Units Open

"Renting an apartment offers extreme flexibility in today's techie generation and offers sociability," says Alexander Goldfarb of Sandler O'Neill. "It's huge how much kids want to be with other kids, and apartments lend themselves well to that. We are not seeing a sudden wave of people moving out to buy homes, even though housing is finding a floor."

In fact, Goldfarb says the move-out rate is now at 16%, below the historical average of 20%. The biggest issue for the big apartment REITs, like Equity Residential (EQR), Avalon Bay (AVB), Essex (ESS) and Camden Property Trust (CPT) , he adds, is slowing growth rates. The stocks themselves are down and underperforming because investors expected this to be the peak year for the sector.

"Does that continue or do other trends boost them?" asks Goldfarb. "When you look at absolute growth rates, it will look very good relative to other sectors, and that will bring investors back to apartments."

Goldfarb does not believe that the burgeoning single family rental market is taking share away from the multi-family sector, but others say it could play a role, especially for lower income families looking for more space. Investors in some of the hardest hit housing markets have been buying up as many distressed properties as they can find, citing new demand.

"I see unprecedented demand, more than I've ever seen in 15 years," says James McClelland, CEO of Chicago-based MACK Companies, a rental property investment group. "Our waiting list is already up to 4 months. if you pass our criteria to become one of our renters you get the honor of sitting on a four month waiting list until the next home is available to you."

The housing market may be recovering, but it is far from a robust recovery, and the lessons learned in the latest crash will likely keep rental demand high. Given where other commercial sectors are with vacancy rates, apartments are still the healthiest; it remains to be seen what all the new supply will do to the fundamentals over the long term. Analysts say 2014 is the year to watch.

--Written by Diana Olick at CNBC
CNBC is a world leader in business news, providing real-time financial market coverage and business information.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $109.49 -1.20%
FB $92.40 0.00%
GOOG $638.31 -0.63%
TSLA $226.00 -2.60%
YHOO $32.35 1.50%


Chart of I:DJI
DOW 17,050.75 +138.46 0.82%
S&P 500 1,995.83 +15.91 0.80%
NASDAQ 4,810.7880 +19.6360 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs