Apartment demand accelerated during the second quarter, pushing national vacancy lower as household formation strengthened and renters faced renewed obstacles to homeownership.
Nearly 190,000 households were formed during the quarter, more than in the previous two quarters combined, according toMarcus & Millichap. Although that total remained below the 2015-to-2019 quarterly average of roughly 240,000, it supported stronger apartment absorption and helped reduce national vacancy by 60 basis points to 4.5%.
Vacancy declined across most major markets. Some of the largest drops occurred in lower-supply Midwest and Northeast metros, but construction-heavy Sun Belt markets also tightened as demand began absorbing units delivered during the recent development wave. Vacancy generally remains higher in those Sun Belt markets, however.
Improving employment contributed to household formation, with employers adding 552,000 jobs during the first half of the year, the report said.
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Conditions in the for-sale market could keep more households renting for longer.
Existing-home sales increased 3.3% year over year in June, while new-home sales fell 5.6%. The median existing-home price rose only 1.8%, well below its 5.5% historical average, but elevated borrowing costs continued to limit affordability.
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