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Multifamily Market Growth Continues Nationwide

 

Before any other sector of the housing market, the multifamily sector came back from the housing collapse. Since that time, homebuyer hesitance combined with cultural shifts and demographic changes have kept multifamily projects at the center of attention for commercial real estate (CRE) professionals.

Perhaps based on recent history during which the housing bubble kept rising steadily with no one preparing for the downfall, people now are trying to prepare for some sort of dwindling down of this multifamily mania. Those fears have been proven wrong, however, each of the past two years, as the following trends demonstrate.

  • California’s Tightening Vacancies in Multifamily. If a slowing occurs in multifamily, it appears that it will begin in California. Since last year, L.A.’s housing market got so tight it fell out of the top 10 cities for multifamily investors. San Francisco and San Jose also lost ground due to exorbitant rent prices.
  • Minneapolis Leads the Midwest. In the Midwest, St. Paul and Minneapolis, Minnesota, made the top five of places where multifamily is expected to continue to grow.
  • Seattle’s Job Market Continues Spurring Multifamily. Jobs are the cause of rapidly vanishing multifamily units and an increase in new multifamily construction projects in Seattle. Landlords, tenants, buyers, and developers all are eyeing Seattle’s multifamily sector.
  • Boston Multifamily Market Lures New York City Renters. As New York City rent prices have gone beyond sky high, those renters are opting to commute from Boston, making it among the top three cities for multifamily. That rise follows coming in at number 10 just last year.
  • Renters Are Bound to Become Homeowners. The multifamily market not only is positive, but also is setting records and beating all expectations. On average, multifamily vacancy rates have stayed right around 6%. For the past several years, that vacancy rate has stayed well below the average. Why predictors are expecting a downturn is logical – what goes up must come down – combined with rising rental prices across the country. Just like vacancy rates that have stayed well below the 15-year average, rental prices are growing at a higher rate than the 15-year average. Rental prices are expected to grow by another 0.1% by 2018. In addition to the multifamily investment rush, the demand for luxury, high-end apartments from people who can afford to buy homes continues to push up the average rent. That slice of the market could begin looking to buy since rental prices have been outpacing the cost to buy a home.   
  • Gen-Xers and Millennials Keep Multifamily Surge Going. In addition to the luxury multifamily market, millennial and gen-X lifestyles may begin to follow a more traditional path than has been seen since the recovery. These two groups started the multifamily surge and some are predicting they also will end it. Young adults aren’t the only ones keeping multifamily hot. Baby boomers have trended toward renting as opposed to owning as well. Before the recession, there were 20% fewer renters than there are today, whereas there are 2% fewer homeowners post-recession.

For more information about these and other nationwide trends in the multifamily market, contact me today.

 
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Steven Miller
Steven Miller
Partner
1 (843) 706-8440
smiller@websterrogers.com
1 Westbury Park Way, Suite 200
Bluffton, SC 29910
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