Renting Still Wins. But That's Only Half the Story.

Renting remains substantially cheaper than owning, but the affordability gap is only part of what's supporting apartment demand.

The average monthly cost of owning a home was $3,070 in the second quarter, compared with $1,894 for renting an apartment, according to Newmark. That's a $1,176 monthly advantage for renting, nearly three times the long-term average of $438. Even compared with buying a starter home across the 50 largest metros, renting is $858 cheaper per month.

The gap remains historically wide, but it isn't widening. A year ago, renting was $1,200 cheaper. The difference has narrowed slightly.

A second force may be more durable. The average rate on existing mortgages remains below 4%, compared with 6.49% for a new 30-year mortgage in the second quarter. Those "golden handcuffs" discourage homeowners from selling, limiting housing turnover. The FHFA estimates 1.72 million fewer homes were sold between Q2 2022 and Q2 2024 because of mortgage-rate lock-in.

Meanwhile, apartment demand is beginning to outrun new supply. First-half absorption totaled 208,072 units versus 167,734 deliveries. If that continues through year-end, 2026 would be the first year since 2021 in which apartment demand exceeds new deliveries.

For multifamily underwriting, these are two different demand drivers. Affordability keeps ownership less competitive. Mortgage lock-in restricts housing mobility.

Two forces, same result. Know which one is doing the work.

Source: The CRE Rundown, Trepp.com

 

Is the company Carbon?

No

Real estate is a local business, regardless of company size. Important to know how your customers purchase your product in your specific market and submarket.

John Ridgway agreed. That sounds like a fee mgmt company or REIT that has a one size fits all mentality.

I worked in the SF Bay Area where we never get inclement weather, and one of my buildings did this. The pricing during Spring and Summer is typically higher so that was one purpose behind that decision at a corporate level. Also, this allowed maintenance to have a designated time to work on projects they never had time to do during the ‘busy’ season like touch up painting common areas. And if weather does hit us (usually just wind and rain) they would have time to address those issues without delaying turns.

Longer leases are good for everyone. It looks them in at that price for a longer term and stops you from turning units in slower leasing months that could sit vacant. I would give it a try and if it doesn’t work for you, explain why it’s not working and have a proposed plan to move forward.

My last apartment in Houston offered odd numbers of months in their Leases (7 months, 13 months, etc.). My understanding was that their system offered varying lengths so that Lease expirations (and potential vacates) were spread out as evenly as possible throughout the year. November thru February is the slowest part of the year, so they may also have limited Leases that expired in those months. But expecting zero move-outs in those months does not seem reasonable in our warmer climate here in Texas.

When I was a regional manager, I had Proprties in different locations. This does work in states in the Midwest they get harsh winters. However, it is not something that would’ve worked on my warmer climate states. Definitely would not have worked on my Florida properties.

I’ve always worked to not have expirations in late Dec to early Jan, made it nice for the Site Team.
I’ve done the weird lease lengths. It takes getting used to, when dealing with prospects. “…would you like the 11 month or 13 month option….”

I'm a property manager but have also been on the other side of this in the past. I actually loved it because I could pick whatever lease term was significantly cheaper. Usually they would offer 9 months for say $1000, then 10 months for $1300 etc trying to get tenants to pick one or another. Come next renewal same thing. We saved thousands that way over the years.