Virtually the entire multifamily industry, from CEOs to asset managers to property managers, including Oden, never expected consumer confidence to power apartment rentals last year. Indeed, if job numbers alone were to tell the story, the economy is still going nowhere fast—unemployment closed out 2010 at 9.1 percent, down from its peak of 10.6 percent in January 2010, according to the Bureau of Labor Statistics, but still well above the 4 percent to 6 percent level that financial experts consider “healthy” for the economy.
What that employment stagnation did result in, however, is more time for working out single-family home loans that would otherwise have headed for foreclosure or the shadow rental market (ultimately decreasing competitive rental stock). A perceived bottoming of the recession seems to have also bolstered optimism among younger renters who had moved home and cash-conscious renters who had doubled up. With free rent deals on the table and a thought that the worst is behind us, rental prospects were eager to pull the trigger on a place of their own in 2010, particularly in the second half of the year.
“We have seen just a remarkable improvement on properties over the past year despite job losses, and that is a phenomenon that took everyone by surprise,” says Brad Miller, president of Dallas-based apartment owner and developer Encore Multifamily. “When you peel the onion back, one of the reasons is a decoupling of those who had doubled up. I think you are seeing some interesting bifurcation in improvement in rents and occupancy in one-bedroom apartments versus two-bedrooms to support that—and those who have a heavier one-bedroom blend are doing extremely well.”
