I hate moving.

Nobody really enjoys relocating all their possessions, but at least some of us have the spatial awareness to angle large bulky items so they will fit through tight spaces. I don’t have the gift, nor does my son. So after carrying a few smaller items into his first apartment last week, getting the couch stuck in the stairwell was probably inevitable.

Yes, just like the famous scene from the sitcom Friends. Pivot!

Fortunately, we were able to get the job done with only a few minor scrapes and minimal loss of paint. And just like that, another renter joins the ranks. It’s a scene that plays out thousands of times across the country each day. There were approximately one million new households created in 2024 – and that was a slow year.

There have been nearly 18 million cumulative household formations since 2012, easily outpacing than the number of new homes built over the same time frame. According to Realtor.com, that has widened the housing supply gap to 4 million – a shortage that would take years to fill at the current pace.

That imbalance eased a bit last year with the construction of 1.6 million new homes (the fastest completion pace in 20 years). Still, the additional supply wasn’t nearly enough to satisfy pent-up demand. Builders blame zoning and permitting hassles, as well as soaring raw materials costs.

The lack of inventory has exerted upward pressure on prices. According to the Federal Reserve, the median national home sold for $411,000 recently. That’s down a bit from peak levels, but still about $100,000 more than the early days of the pandemic.

Of course, your money will stretch much further in a town like Omaha, Nebraska than a high-priced metro area such as San Francisco. Still, in just about every market, that updated 3-bedroom, 2-bath split level on a quiet cul-de-sac appraises for considerably more now than it did just a few years ago.

That might still be manageable if borrowing costs had eased. But the average 30-year mortgage loan remains stubbornly high at 6.6% — double the prevailing rate from 2021 (before hyperinflation triggered the Fed’s great tightening cycle).

Prior to Covid, an average house note (assuming a 20% down-payment) under an average mortgage rate would have run about $1,100 per month. Today, the same property costs more than $2,150.

That’s over $1,000 more per month… or $378,000 over the life of the loan. And that’s before you include property taxes or insurance. I left them out to simplify the calculations. But rest assured, they add to the total.

Of course, housing costs only tell us half the picture. It’s the ratio between cost and income that truly matters.

Gone are the days when a decent home was equivalent to about 3 or 4 years of wages. While median household income has doubled since 2000 (from $42,000 to $80,600), home prices have nearly quadrupled. So today, it takes about 5 to 6 years of income to buy a home.

Even in some of the more affordable housing markets, countless buyers have suddenly been priced out. The lack of “for-sale” signs in front yards isn’t helping. As we speak, there are just 1.55 million existing homes listed for sale – a thin 4.5-month supply. Few people want to trade an old 3% mortgage for a new 6% mortgage.

Throw in tighter lending standards, and you see why homeownership rates have fallen from a peak of 69% in 2004 to less than 65% today.

For some, it’s not purely a financial decision. Increasingly, it comes down to lifestyle choices, particularly for the younger Millennial and Gen Z crowds. Some don’t want the hassle of lawn care and other routine maintenance and upkeep. Others don’t want to be tied down and prefer having the flexibility to move easily.

Whatever the reason(s), more than 44 million U.S. households pay rent each month. Excluding single-family rentals (we’ll save that subsector for another day), macro tailwinds propelled multi-family (i.e. apartment) rents up 8% nationally in 2023 and another 4% last year.

Sources vary, but Apartments.com shows an average rate of $1,639 for one-bedroom and $1,899 for two-bedroom units as of September 2025.

Heavy construction has boosted supply, adding 19,000 new apartment properties (608,000 individual units) last year. That was the most completions since 1986, but building activity has since tapered off. And the extra capacity is quickly being absorbed.

Across the country, apartments are currently 93% occupied, with a vacancy rate of just 7.1%. Keep in mind, such metrics can vary dramatically from zip code to zip code. For example, vacancy has reached double-digit territory in Austin, Texas after the addition of 23,000 new units over the past two years.

Nevertheless, it’s a pretty good time to be in the residential real estate business – which explains why the apartment REIT sector has a combined market cap of $194 billion.

As mentioned in the headline, one of the more notable admirers is Warren Buffett. When explaining the difference between productive and unproductive (like cryptocurrency) assets, Buffett singled out rental properties as a shining example of the former, saying “if you offer me 1% of all the apartment houses in the country for $25 billion, I’ll write you a check.”

Of course, he’s not the only one to spot hidden value.

One of my biggest recommendations in this space was a spin-off called AIR Communities, which was bestowed with a portfolio of 26,000 apartment units clustered in core coastal metro markets such as Los Angeles, Miami, Boston, and Washington, DC. The business was taken private by Blackstone last year in a $10 billion acquisition priced at $39 per share – a generous 25% takeover premium.

These days, I’ve got Mid-America Apartment Communities (NYSE: MAA) on my radar. Focused on faster-growing job markets across the Sunbelt states, the Memphis-based organization collects steady rent on more than 100,000 apartment units from Nevada to Florida.

A proud member of the S&P 500, MAA has been in business for 30+ years – dishing out 126 consecutive quarterly dividends over that span. Shareholders have enjoyed healthy compounded annual returns of 11.4% over the past two decades – nearly 300 basis points above the peer group average.

With an occupancy north of 95%, MAA is aiming for funds from operations (FFO) of $8.77 per share in 2025. And management intends to distribute about 70 cents on the dollar via dividends. This key metric is expected to continue climbing at a 5% clip, fueled in part by an ambitious $1 billion development pipeline centered in attractive markets like Dallas and Nashville that are seeing a population influx.

Down sharply from former highs above $200, the stock is attractively priced at $142 and carries a yield of 4.3%, more than double the market average.