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Apartment List Vacancy Index Methodology Explainer

Introducing the Apartment List Vacancy Index

At Apartment List, our research team is committed to providing accurate and timely data so that those interacting with today's quickly changing housing market can make well-informed decisions. For years, our Monthly Rent Estimates have equipped researchers, journalists, industry specialists, and the general public with data on the latest pricing trends. Today, we’re thrilled to announce the release of our newest data product -- the Apartment List Vacancy Index.

While this isn’t the first time that we’ve presented data on vacancy trends, we’re now officially making that data publicly available on our data download page, with trends going back to 2017 for hundreds of individual locations across the U.S. at various geographic levels (national, state, metro, county, and city). As always, we aim to promote full transparency around our public data products. For those interested in getting deeper into the weeds, read on for a complete explanation of the methodology behind our vacancy index.


Methodology

To calculate our vacancy index, we leverage the extensive dataset that powers our platform. Apartment List maintains robust data integrations with the properties that list with us, allowing us to track pricing and availability changes as soon as they occur. This not only creates a great experience for our users, but also gives us unique insight into trends in the rental market. For every property on our platform, we know the total number of units in the building, as well as the number that are vacant on any given day, allowing us to calculate a daily vacancy rate for each property in our sample. Our monthly vacancy index for a given location is calculated by taking an average of the daily vacancy rates for each property and then averaging the rates of all the properties that fall within the bounds of the given location (city, county, metro, state, or national), weighted by the number of units in each property.

While the explanation above accurately describes our general approach, the complete calculation involves additional nuances that are important to note. Most crucially, the simplest version of this calculation ignores a key limitation – a given property’s vacancy rate is not independent of its decision to list with Apartment List. Rather, those properties which have the greatest need to fill vacancies are most likely to find value in partnering with us. As shown below, in the first months when a property appears on our platform, they tend to have elevated vacancy rates, which then gradually stabilize over time:

In order to control for this selection bias, we exclude new properties from the sample for our vacancy index calculation until they have been on the platform for at least six months. For “lease-ups” – newly developed properties that start off entirely vacant – we impose a stricter criteria, excluding data for six months after the first month in which the property is at least 50 percent occupied, allowing additional time for the property’s occupancy to stabilize before we enter it into our sample.

After applying these filters, we then calculate our index for all locations in which we have sufficient data. In order to publish a vacancy index for a given location, we require that our sample for that location consists of at least 25 properties in each individual month over the course of the past year. We include a longer history for a location only when sample sizes continue to exceed the minimum sample threshold. Importantly, our inventory is heavily skewed toward large multi-family properties, meaning that even with a relatively small number of properties, we are able to observe a large number of individual units. Among all cities where we publish a vacancy index, the average monthly sample consists of more than 17,000 units.

Based on the methodology described above, our resulting vacancy index serves as a valuable and timely new indicator of trends in the rental market. As expected, it exhibits a strong inverse relationship with our existing estimates of rent growth:

Comparing the national median rent in the top panel to the national vacancy index in the bottom panel, we see that when our vacancy index tightens, prices tend to increase, and vice versa. This relationship can be understood intuitively through a simple supply and demand framework. When properties have a large number of vacant units that are failing to attract renters, property managers are likely to lower their asking prices in order to spur demand. Conversely, when renters are competing for a tight supply of available vacancies, property managers are able to raise prices. The fact that these two data series demonstrate this relationship so clearly serves as a validation that our index is accurately capturing the dynamics at play in the market

While we are confident in our methodology and the accuracy of our index, it is nonetheless important to also acknowledge its limitations. As mentioned above, our sample of properties is heavily skewed toward large multi-family apartment complexes, generally containing 50 units or more per property. It is conceivable that occupancy trends in this segment of the market differ from those of smaller rental properties. In this sense, our index may not be fully representative of the market as a whole. Additionally, it is important to bear in mind that the properties that list with us have self-selected into our platform, generally because they have a perceived need for assistance in filling vacancies. While we partially control for this in the manner described above, it may be the case that even after the initial stabilization period, the properties on our platform continue to have higher vacancy rates than the market-wide norm. Finally, our methodology does not fully control for the composition of our sample; in other words, new properties are gradually added to the sample over time, while others may drop out, meaning that the sample of properties that we observe varies somewhat month-to-month.

As always, we hope that providing open access to this data, as well as transparency around our methodology, will help to democratize a better understanding of the ever-evolving rental market. Feel free to contact our team at research@apartmentlist.com for any questions.

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The Apartment List Research Team is a small but mighty group of economists and analysts dedicated to understanding the rental market as it evolves rapidly. On our blog we publish original research reports and offer robust data products for public use. Read More
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