Construction on buildings with at least five apartments reached the highest monthly pace since the beginning of 2006, Freddie Mac reports in its Economic and Housing Market Outlook for September. A similar boom has swept the Omaha metro area.
“Over the past four quarters, all the growth in net household formations has been among renters,” Freddie Mac’s report notes. “The decline in home ownership rates has been primarily concentrated among younger households.” Over the past decade, the home ownership rate among those 35 years old and younger has fallen from 43.6 percent to 35.9 percent.
The rising number of tenant households has prompted vacancy rates to drop to the lowest level since 2000.
“The apartment market has been vibrant, reflecting the desire of many millennials to live in an urban setting and retain locational flexibility,” says Frank Nothaft, Freddie Mac’s chief economist. “Unfortunately, if they’re looking to live in the larger cities, that’s where rents are rising the fastest, especially in the West or Northeast regions of the United States – places like Los Angeles and New York City.
Omaha’s Seldin Company reports strong demand for its still under construction Tuscany Apartments, a luxury development in Papilion. It is filling almost as fast as units become available, said Bob Dean of Seldin Co., which developed and manages the property. Units rent for up to $1,550 per month.
The Omaha metro-area apartment market is outshining the national average in key areas such as the pace of new construction, Dean and other real estate pros report. Building permit activity locally has surpassed its 2008 peak. Beyond Papillion and across the metro’s Sarpy, Douglas and Pottawattamie Counties, apartment living in roughly 90,000 leasable units is dominating the housing landscape in ways not seen in the last decade or so.
The number of new Omaha metro area apartments is projected to grow 3.2 percent in 2014 over 2013 – that’s above the 1.9 percent increase anticipated for the nation and the largest annual jump for the Omaha area since 2001, according to Reis Inc., a New York City-based real estate trend watcher.
Building permits issued for new construction have jumped more than fourfold, from about 370 apartments in 2009 to 1,600 in 2013, according to Greater Omaha Chamber of Commerce records. Because of Omaha’s tracking system, a planning official said that increase doesn’t even reflect all the hundreds of units added to the inventory by way of conversion of old office buildings, mostly in downtown and midtown.
The vacancy rate fell to 3.4 percent last year, the lowest Reis said it’s been for any full year since at least 2007, and it dropped further the past two quarters. The second quarter’s vacancy rate was 2.9 percent, putting Omaha among the markets with the largest vacancy declines since the first quarter. Only 17 markets nationally registered a multifamily unit vacancy rate lower than 3 percent this past quarter, Reis reports show, and that constituted a post-recession high. The U.S. vacancy rate average was 4.1 percent for the same period.
Ryan Severino, a senior economist at Reis, pointed to the fall in Omaha’s apartment vacancy rate from a peak of 7.4 percent in late 2009. “That’s the kind of movement that serves as a catalyst for people to start building,” he said.
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