Key Takeaways: We are publishing our inaugural Hedgeye monthly apartment rent tracker for the month of July, which is based on data aggregated from Apartment List. We find the data to be extremely useful on a number of fronts including: (1) it is based on a "same store" concept, which helps normalize for survivorship bias and the impact of new (and usually premium rent) units driving up the current period figures, (2) the data is segmented by unit type (we focus on 1BR), and (3) it is based on actual transactions, providing a real-time look at prices paid versus simple survey data. A few observations:
- Every submarket important to the apartment REITs is seeing sequential increases through July, with the slowest grower being Kansas City, MO (+1.2%). Florida submarkets continue to see the strongest sequential growth along with a recovering New York City (+5%), while California continues to lag
- As can be seen in the top chart, there are roughly ~8 months (or ~3 quarters) remaining of easy y/y COVID comparisons. Several California submarkets, specifically LA, Oakland and perhaps SF, appear to be finally on the cusp of turning positive y/y
- We view the data as supportive of our Long Bias calls on AVB and EQR, which are less risky but attractive ways to play any return-to-work trade, which itself is being pushed back daily it seems. The apartment will be needed regardless of how many days are spent in the office
- From a macro perspective, we find the data to be generally supportive of rising contribution from the "true rent" component of CPI (~7.6% weighting). There are at least 7-8 months of comparisons (Aug 2020 - March 2021) where the y/y changes in median rental rates were negative and are left to "burn off" before high rental rates blend into the pool and drive up aggregate changes
PDF Link: July 2021 Rent Tracker
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
Cell:
