Consumers Feeling More Confident, Inspiring Apartment Demand

While the U.S. economy has been on good footing for a while now, consumer confidence didn’t turn around until recently, and that sentiment has boosted apartment demand.

Consumer confidence and apartment demand trend together. When consumers feel good about the economy, apartment demand makes notable strides. Likewise, in times of perceived trouble, the human reaction is to hunker down until the storm clears, dampening apartment absorption.

In 3rd quarter, the U.S. apartment market absorbed a little over 90,800 units, according to data from RealPage Market Analytics. While that was below some of the quarterly demand tallies from the decade leading up to the COVID-19 pandemic, positive demand in 2023 is a notable turnaround from the net move-outs seen throughout much of 2022, when consumer sentiment hit a record low.

The University of Michigan’s Consumer Sentiment Index is a monthly survey that measures how Americans feel about spending money and the confidence they have in the future of the economy. This measure increased steadily between 2011 and 2015, then plateaued from 2016 to 2020 before plunging with the spread of the COVID-19 pandemic, which effectively ended the nation’s longest economic expansion on record. After that record-breaking decline in consumer sentiment, the economy recovered in 2021 as vaccines were distributed and federal relief was granted, causing a short-lived upturn.

In 2022, consumer sentiment hit near 30-year lows as inflation climbed to a 40-year high and the Federal Reserve started hiking interest rates to combat that increase. While the economy was actually in good standing, it didn’t feel that way to consumers, who were paying more and more in interest rates throughout the year.

But 2023 saw another turnaround for consumer confidence, as inflation has eased and the future looks more stable. While consumer sentiment is not as high as it was before the pandemic, it’s at least on its way up once again. As a result, household formation has improved, bolstering apartment demand.