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U.S. apartment inventory nearly full, highlighting supply crunch

New data shows occupancy at 95 percent nationwide

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Apartment occupancy is near record levels in the United States, according to a new report, and seems unlikely to decline anytime soon.

A full 95 percent of apartments in the country are occupied, according to an analysis of rental data by RealPage, a real estate technology and analytics firm, a near record-level. According to Greg Willett, the firm’s chief economist, the strong demand comes from the combination of “solid job formation, continued limited loss of renters to home purchase, and widespread availability of appealing new apartments."

Construction is falling far behind demand. During the last quarter, developers added 86,431 units across the country. But RealPage analysis suggests the total demand for units was 175,645, an increase of one-third from the same quarter last year.

For the most part, new availability is clustering, especially in growing markets. The report shows there are almost no vacancies the nation's older apartment communities, and product availability is concentrated in brand-new developments.

"Total demand for new apartments is strong, but that demand is getting split among many individual projects in the country's markets registering the most aggressive building," according to Jay Denton, vice president of Axiometrics, which owns RealPage. "In urban core settings, those new deliveries are clustered really tightly. It's not unusual to have multiple projects within blocks of each other all simultaneously moving through initial lease-up."

That demand has pushed up rent growth on average 1.8 percent during the second quarter of 2017. Monthly rent now averages $1,339 in the U.S., according to RealPage data.

These findings support the supply crunch highlighted in the latest report from Harvard’s Joint Center for Housing Studies. Tighter inventory in starter homes, fueled by high demand, has pushed more Americans to become renters, leading to the lowest gross vacancy rate since 2000.