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  • Writer's pictureRealFacts Editorial Team

Unit turnover, move-outs to buy drop


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In recent years, the dynamics of the rental market have seen a noticeable shift. According to a new report from Redfin, a growing number of renters are staying in their units for longer periods than they did a decade ago. This trend presents significant implications for investors in the multifamily real estate sector.


A Closer Look at the Data


The report highlights that over one-third of U.S. renters have remained in the same apartment for more than five years. More strikingly, 16.6% of renters had stayed in their homes for 10 years or more in 2022, up from 13.9% in 2012. Additionally, another 16.4% had lived in their home for five to nine years, compared to 14% a decade earlier. 


This shift is not uniform across generations. Gen Z renters are the most mobile, often moving within a year due to their life stages, such as college or the early years of their careers. Conversely, over half of baby boomer renters have stayed in the same unit for at least five years, and just over one-third have stayed for over a decade.


The Influence of Rising Costs and Limited Availability


Redfin identifies several key reasons for this trend of increased rental tenure. First and foremost is the dramatic rise in home prices. The median price of a home has more than doubled since 2012 and increased by more than 40% since 2019. This significant appreciation has priced many potential buyers out of the market, leading them to remain renters for longer periods.


Additionally, asking rents have risen more than 20% between 2019 and 2022, making the cost of moving between rental units increasingly prohibitive. The limited availability of homes for sale further exacerbates this issue, with far fewer homes on the market in 2022 compared to 2012.


The appeal of renting as a lifestyle choice has also grown, particularly among remote workers who value the flexibility to relocate easily. This shift in lifestyle preference, along with the financial barriers to homeownership, has contributed to the trend of longer rental tenures.


Regional Variations and the Impact of New Developments


The report also sheds light on regional variations. For example, Austin, Texas, which is experiencing a high volume of new apartment deliveries, had the highest share of renters moving out within a year at 38.8%. In contrast, only 15.8% of renters in New York City moved within a year in 2022, primarily due to the city’s high cost of living.


Looking ahead, Redfin's Senior Economist, Sheharyar Bokhari, suggests that the current boom in apartment construction could provide renters with more options and potentially lower prices, which may increase unit turnover shortly.


Implications for Investors


For investors in the multifamily real estate market, these trends carry significant implications. The increase in long-term renters suggests a stable tenant base, reducing the costs associated with high turnover rates. This stability is reflected in the performance of major apartment REITs (Real Estate Investment Trusts). For instance, Chicago-based Equity Residential (EQR) reported a record low unit turnover and a high occupancy rate of 96.5% in the first quarter of 2024. Similarly, Arlington, Virginia-based AvalonBay Communities (AVB) saw a significant decline in residents moving out to buy homes.


Both companies attribute their success to factors such as a focus on customer satisfaction, the strategic use of data, and centralized renewal teams. These practices have helped maintain high occupancy rates and low turnover, demonstrating the value of tenant retention

strategies in the current market.


The Future Outlook


While the report from Redfin does not account for the impact of rising interest rates, which began increasing in 2023, this factor is likely to further influence rental and housing markets. Higher interest rates make mortgages more expensive, discouraging potential homebuyers and potentially driving more people to remain renters. At the same time, these rates increase costs for property owners, potentially leading to higher rents.

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