The multifamily sector is continuing its strong performance in the face of historic rent growth and rising materials costs, but challenges remain.
Renters in the U.S., rejoice! This week it was announced that asking rents increased 11% on an annual basis and are at their highest point yet with a year-to-date increase of over 10%.
A panelist from National Multi Housing Association said they had never seen such high increases like we’ve seen these last few months – not even during 40 years’ worth its tenure as member organization when there were other historical booms or busts happening around us (think: 2008 financial crisis).
Rent hikes keep rising due to demand for housing while supply remains stagnant which causes prices go up faster than inflation rates can cushion them against price drops, pushing many families further away from affordability.
With labor shortages becoming an issue for some operators as well as backlogs plaguing suppliers due to slow demand during this time period that historically slows down rental markets (fall), many are wondering how much longer current levels will persist before they too begin trending downward?
Despite the pandemic, multifamily fundamentals have held steady. In fact, they’re even improved as wage gains and rent declines in expensive markets slow down recovery after a global health crisis which has dominated headlines for 18 months now from 2019.
The main concerns from last year remain – affordability being one of them that was getting worse before it took an unexpected turn with another major issue: The lack of housing development due to high costs associated with building new construction projects or converting properties.
In the past few years, SFRs have been a popular choice for young families. As Millennials age and enter into their prime home-buying period many will be priced out of the market as they’re unable to purchase homes with reverse mortgages or low-down payment requirements due increase mortgage interest rates during an economic downturn which makes renting more appealing than waiting for another sale opportunity where prices may again drop drastically.
Single family rentals offer these individuals spacious living arrangements at affordable costs while still being able buy something new when ready without having any negative equity from previous losses on other properties.
The U.S multifamily industry is healthy, with demand for housing of all forms remaining high and long-term issues likely to resurface once the economy normalizes in time. Looking at year end 2021 forecasts—which are incredibly high due to strong growth predictions–there’s cause for optimism but also caution as it could lead down paths like rent control or other regulations that would only hurt economic expansion further down the line (i.e., our next generation).
The multifamily market is expected to continue growing, even if interest rates and the Fed begin a slowdown. The industry has been well positioned with strong performance today that will last into 2022.