Multi Family: A Recovering Market
We all know whats happening to the single family home markets. Over supply and shadow inventory and the subsequent price declines will continue until fear is overcome and inventory is soaked up.
The kinds of issues that led to a boom bust in housing did not take place with multi family. There was no build out leading to over supply and the lender market was much more rationlized. Little of the kind of lending that led to so many foreclosures, ultimately driving home prices down.
Lack Of Supply In The Rental Market
From 1997 to 2006, multifamily construction was about 342,000 new units per year, but by 2010 they new construction declined 66%. Government estimates indicate we will need 1.5 million additional units annually just to keep up with population growth. Quite a shortfall, indeed
Lack Of Lender Interest In Funding Any Real Estate
Adding to a undersupply is a real lack of lender interest in more housing of any kind. Although this appears to be a negative, it protected the sector from the boom mania and has kept the multi family market on a sound footing.
Foreclosure
Realty Trac reports annual foreclosure filings spiked from 1 million in 2006 to 3.9 million in 2009, and were about the same number in 2010. Finally, the huge foreclosure debacle is making renters out of all of us.
Demographics
The combination of immigration, retirees moving back in and a new generation up will equal the size of the boomers,creating a large pool of new renters. Now thats huge!
A Solid Market
The national vacancy rate for rentals fell 17% last year to 6.6%, according to Reis. And rents jumped. In New York, up 9% on average in the last five years; in San Jose, they’re up 8% San Francisco, one of the best rental markets in the country has seen its vacancy rates drop as rentals in all neighborhoods post new highs.
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