Earlier this year, there were signs that construction would spike in 2013, in the order of 150,000 to 200,000 units. Developers have since postponed many projects to 2014, so that 2013 figures hover closer to 130,000 units – not far off from the pre-recession 10-year annual average of around 125,000 units. The “bubble” now shows up in 2014, but if economic growth ramps up, then additional supply will most likely be absorbed relatively painlessly.
This is not to say that certain metros will not be at risk. Washington, DC and Suburban Maryland both face historically high inventory growth prospects over the next couple of years; these metros cannot rely on solid demand drivers such as strong employment growth in certain sectors like tech to push demand for rentals like Austin or Seattle.
All this is not to say that apartment vacancies will continue to crater more than 100 basis points per year, since current levels are already so tight. Reis projects vacancies to remain in the low 4s through 2015, not much lower than its current 4.6%. Landlords recognize this, and have shifted their focus from improving occupancy to raising rents to meet revenue goals. There is a limit to how much landlords can raise rents as well, given that household income levels have remained relatively stagnant. But if GDP growth improves and the economic pie starts growing at a faster rate, apartment properties are poised to share in the benefits as well.