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What Does Declining Turnover Rate Mean for Apartment REITs?

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The current home ownership rate of 64.3% remains below the pre-recession (2000 – 2008) average 68.2%. That is according to a recent apartment REIT report from analyst firm, BTIG.

“While the home ownership rate has increased slightly since mid-2016, we do not expect a material reversal of the lower home ownership trend over the next few years due to low single-family inventory, rising prices, and higher borrowing costs,” the report says. “These factors have also contributed to lower turnover of renters as move outs to buy homes remain low; lower renter turnover limits operating expense growth for our coverage.”

And the report says that we can expect these trends to continue.  “No near-term material change is expected from shifting demographics.” As of 2017, millennials comprised about 21% of the total households in the US but under 12% of home owners, the report says. “In contrast, households aged 65-plus comprised 25% of total households and 31% of owners.”

According to the report, overall, the historically low home ownership rate, strong rental demand, lower turnover and move outs to home buying, and slowing supply create a supply/demand dynamic, which favors the apartment owners.

Lastly, the report expects demand to be strongest in the West and Sunbelt regions where REITs like Camden and Essex, for example, have the greatest exposure.