Studio Goldmines and Three-Bedroom Busts: Following the Money in Rentals | Real Estate Market Update w/ Martin Perdomo

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The rental market has reached a pivotal turning point that smart investors can't afford to ignore. After more than two years of stagnant or declining rents, we're witnessing the biggest year-over-year jump in apartment rents in two and a half years. At $1,790, the median asking rent has climbed 1.7% since last July – and this is just the beginning of what could be a significant upward trajectory.

What's behind this shift? A perfect storm of economic factors. Homeownership remains financially out of reach for many Americans, pushing more people into rentals. Simultaneously, multifamily construction has hit the brakes – permits are down 23% nationally since the pandemic building boom. This supply-demand imbalance is handing power back to landlords after years of tenant-favorable conditions.

The geographic patterns tell an equally compelling story. San Jose leads with an astounding 8.8% rent increase while its building permits plummeted 74%. Chicago, Washington DC, Pittsburgh, and Philadelphia all saw rent jumps exceeding 7.5%. Meanwhile, markets like Jacksonville and Austin, where construction continues aggressively, are experiencing rent decreases. Perhaps most revealing is the unit size data: studios and one-bedrooms are up 3.4%, while three-plus bedroom units fell 1.5% – clear evidence of changing demographic preferences as younger generations delay family formation.

For multifamily investors, these signals demand action. With Gen Z (larger than the Boomer generation) entering prime renting age and construction slowing, we're heading toward an even more severe housing shortage in the next 2-3 years. Don't let higher interest rates keep you on the sidelines – you can refinance later, but the opportunity to secure properties before this supply crunch fully materializes won't wait. Follow me on Instagram and Facebook @EliteStrategist for the unfiltered strategies we're implementing behind the scenes to capitalize on these market shifts. Be strategic, be early, be elite.

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Episode Transcript

Speaker 1 (00:01):
Welcome back to this week's Real Estate Market Update
, where we break down what'sreally happening with prices,
buyers and strategy.
Later in the episode, I'll tellyou how to stay plugged into
the moves we're making behindthe scenes so you can move fast,
fund smart and scale in today'smarket.
According to a brand new datafrom Redfin, us apartment rents

(00:37):
just posted their biggestyear-over-year jump in two and a
half years.
Rents are rising, supplies istightening and if you own, or
plan to own, mid-to-largemultifamily units, this episode
is for you.
Let's get into it.
The median asking rent for USapartment is $1,790 in July, up

(00:57):
1.7% year over year.
That's a $30 jump and it's thelargest increase since January
of 2023.
This marks the secondconsecutive month in positive
growth after more than two yearsof flat or falling rents, and
while we're still below the peakrent level we saw in July of

(01:20):
2022, momentum is clearlyshifting and is favoring
landlords again.
Finally, so what's driving this?
It's all about supply anddemand.
On one side, demand is rising.
The cost of home ownership isstill high and more people are
choosing or being forced to rent.

(01:42):
On the other side, multifamilyconstruction has also slowed way
down.
Permits to build new apartmentunits are down 23% nationally
since the pandemic building boom.
That means less new supply iscoming to market and landlords
are regaining the leverage.

(02:02):
Redfin's senior economist saidit best Rents are sluggish in
the past two years because ofoversupply created during the
pandemic.
Now that construction isslowing, the power is shifting
back to the landlord.
That's a key point and forthose of us holding multifamily
assets or looking to get intothe game, this is the signal

(02:26):
we've been watching for.
Now.
Very, very, very important hereto point out.
We see multifamily permits down, which means that in two, three
years we're going to have awhat again?
A housing shortage supplythat's even bigger than the one

(02:48):
we have now.
Gen Z generation is bigger thanthe boomers generation.
Gen Z needs a place to live andnow, with the slowdown of new
building and new apartments,that's going to create a problem
which is going to createscarcity in the market, which is
, with demand coming to market,that's going to increase rents

(03:12):
even more.
So if you're an investor andyou're on the sideline because
interest rates are high, stop itwith that.
Get out there and buy deals,make sure they cash flow, even
with higher interest rates.
You can refinance later, okay,but if you sideline.
For those of you that have beensidelining, you're going to

(03:33):
watch us, the pros, eat yourlunch.
So if you want to eat with me,make sure you go out there and
buy.
San Jose, california bye, sanjose.
California just posted thelargest rent increase in the
nation in the nation, up 8.8percent year over year, with a
median asking rents hitting 3569dollars.

(03:56):
Holy crap, that's a mortgage.
That's insane.
Chicago came in close behind at8.6%, followed by Washington DC
at 8.5% and Pittsburgh andPhilly Pittsburgh at 7.7% and
Philly at 7.5%.
And it's no coincidence thatthese cities also saw a massive

(04:18):
drop in new construction permits.
Look at the direct correlationguys.
Direct correlation Newconstruction permits down,
prices up.
In San Jose, for example,building permits have fallen 74%
since the pandemic.
That kind of supply freezedrives prices fast when demand
stays strong.

(04:39):
On the flip side, rents arestill falling in places where
supply is coming online faster.
Jacksonville, floridaunfortunately, my state saw the
biggest decline down 33.5%year-over-year.
Austin declined.
My friends, I have some friendsin Austin.
My girl Tamar.
I know you're a big investor inthere.

(05:01):
Shout out to you, my girl Tamar.
Louisville, cincinnati, phoenixand Cleveland also saw slight
drops.
These metros have continued topermit aggressively.
In fact, austin permitted morethan 63 multifamily units per 10
000 people over the past year,second highest in the nation.

(05:26):
It's just simple math, guys.
Simple math a lot of supplyright over supply in the market
drops prices.
Less supply in the market.
Higher demand increases prices.
It's just simple math, guys.
This is the old supply anddemand thing.
It's the basic, fundamentalstuff.

(05:47):
So, again, this is a supplystory.
In overbuilt markets, rents aresoft.
In undersupplied markets,they're heating up Investors who
know the difference.
That's where the edge is Now.
Here's something especiallyrelevant if you're managing or

(06:09):
acquiring apartment complexes.
Studio and one-bedroom rentsare up 3.4% year-over-year, the
strongest growth since 2022.
Two-bedroom rents climbed 1.7%,but three-plus-bedroom units
actually fell 1.5%.
This data just makes sensebecause if you study migration

(06:33):
patterns and if you study whichI do, if you're an investor, you
should be watching this stuffand you study population growth
remember America's population isactually slowing down, so
people are waiting longer tohave family.
So if Gen Z and millennials arewaiting longer to have family
and to have children, that meansthat these bigger spaces, like

(06:56):
the three and four bedrooms, aregoing to have less demand.
This tells us renters' demandis highest for smaller
apartments, more affordableunits If your portfolio skews
towards compact, high-densitylayouts.
If you're considering value-addconversions, that's where the

(07:16):
yield is growing.
To my partner, javi, if you'relistening or you're watching,
right on the money baby, we'retaking those units and we're
turning them into a bunch of onebedrooms and studios.
So the data points that that'swhere the puck is going.
So what do you do with all ofthis?
If you're in planning orgetting into multifamily,

(07:39):
especially midsize apartments orlarger, here's what matters
Review your unit mix and adjustyour rent strategy accordingly.
In high-demand metros withshrinking supply, consider
pushing rents more aggressivelyin Q3 and in Q4.
In oversupplied markets likeAustin or Jacksonville, focus on
retention and renewals, sweetenthe lease terms, keep occupancy

(08:03):
stable and ride out the flood.
That is exactly what we'redoing up down south with our
down south asset.
It's exact strategy.
If you're acquiring, lean intometros where permits are down
and demand is stable.
That's where long-term equityand cash flow converge.

(08:24):
And remember concessions arelike free parking and reduced
rents were common all over thepast two years, but they're
drying up rápido fast.
If you're negotiating leasesnow, you may have more room to
shift terms in your favor If youwant to keep getting the

(08:47):
unfiltered truth on this marketthe numbers, the funding
strategies and the exact placewe are running behind the scenes
.
Follow me on Instagram andFacebook.
Just search at Elite Strategistand if this episode helped you
get clear on your next move,share it with another investor
who needs to hear thisinformation.

(09:07):
That's your Wealthy AF marketpulse.
Be strategic, be early, beelite.
Catch you next week.
Peace out.