A little over a year after the pandemic hit the United States and buckled the rental housing market, the business fundamentals of apartments are bouncing back across the board.

The latest report from the National Multifamily Housing Council, a Washington, D.C.-based apartment advocacy group found that the multifamily market is improving in terms of reduced vacancies, increased sales, equity lending and debt financing. The report surveyed 118 CEOs in the apartment industry, along with other senior executives at multifamily-related firms.

“Everything is on a positive trajectory,” Robert Hart, founder, CEO and president of TruAmerica Multifamily, told CoStar News. “You’d never know there was a pandemic.”

TruAmerica Multifamily is a Los Angeles-based real estate investment firm that targets properties in secondary cities and city suburbs where upgrades can be made to support rent increases. Only about 5% or 6% of the company’s portfolio is in downtown cores.

The report shows what apartment executives in both multifamily sales and leasing have been saying for months: Investments in U.S. multifamily is surging, with global players including Kennedy Wilson, Ivanhoé Cambridge and BentallGreenOak committing billions of dollars to invest in American apartments.

Rents are rising in nearly every major U.S. city, too, with three cities recording year-over-year rent growth steeper than 20%. In early July, availability rates for suburban apartments had fallen to unrivaled lows of below 4%, while vacancy rates for urban apartments significantly improved at a rate of less than 5%, according to a CoStar analysis.

The pace at which rents are rising is unprecedented, too, as one-bedroom rents are up about 7.5% nationally since the start of 2021. And deal volume is up, with the total multifamily volume in the first half of 2021 almost matching the record-high first half of 2019, surpassing the total amount of trades that closed in 2020.

“It’s more competitive now than it’s ever been,” Hart said, referring specifically to the multifamily investment market.

Sales, Financing Rise

In the survey, 60% of respondents said the volume of apartment sales in their markets is higher than it was three months ago. In January, only 35% of respondents agreed with that statement. And 41% of respondents said that equity financing is more available now than it was three months ago, compared to 24% agreeing with that statement in January.

The surging market comes as several intersecting demographic factors make apartments more popular. During the pandemic, many white-collar workers kept their jobs and saved money by staying close to home all year.

While many of those workers have enough money to consider buying a house, the limited supply of single-family homes, the lack of construction of single-family homes and the sudden acceleration in demand for those homes means those would-be homebuyers are remaining renters — renters with cash to spare.

To that end, the survey found that 92% of respondents are experiencing tighter apartment markets, which the survey defined as having low vacancy and increasing rent. In January, only 16% of respondents were experiencing a tightening market.

“In general, people are getting married later in life and changing geographies more frequently, and that supports renting,” Omar Rihani, vice president at Chicago-based Project Management Advisors, said in an interview. His commercial real estate consulting firm’s clients include the national real estate investment trusts Aimco and UDR, along with PNC Realty Advisors, Sterling Bay Companies and Hyatt Hotels.

A fair amount of the multifamily sector’s improvements can be attributed to the drop that most apartment and broader real estate fundamentals took during 2020. But that’s not the only factor at play, Rihani said.

Many of the factors driving apartment growth, the lack of affordable for-sale homes, would-be homebuyers living more transiently and setting down roots later in life, and people waiting longer to have kids, are all factors that existed before the pandemic. And it’s those persistent demographic trends that are coupling with an improving apartment market that’s leading to the sector’s dramatic growth.

“A lot of those fundamentals were there prior to the pandemic, and they’re still here,” Rihani said. “I’m not saying there isn’t a ceiling, or there isn’t a floor, but there’s still strong optimism for the multifamily space in key markets.”