Multifamily Market Mania: What You Need to Know Right Now
Multifamily properties are thriving! According to Freddie Mac’s mid-year multifamily outlook, the U.S. market has vacancy rates at a 13-year low. So, why the increase of demand for multifamily properties? Joint Center for Housing Studies of Harvard University states that there are several factors to look at that could be contributing to the rise of apartments:
- Higher mortgage interest rates for single family homes
- Slow pace of job growth
- Persistently low inventories of for-sale homes
- Slow pace of single-family housing recovery
- Many would-be homebuyers may be burdened by student loan debt
- Pullback in investor purchases of distressed properties
Meanwhile, growth in the number of renter households was still on the rise last year. Reports show an addition of more than one million new renters annually between 2005 and 2013, doubling the average pace in any decade since the 1960’s. On top of that, construction of multifamily units continued in 2013 surpassing the 300,000 mark for the first time since 2007. Experts have predicted that 2014 will be the strongest overall year for the apartment market since the recession ended.
With the combination of improving job growth and households shifting from owning to renting, the multifamily demand continues in the US. Multifamily sales volume exceeded $26 billion in Q2 of 2014 for a 39.3% year-over-year gain, the strongest gain among all property types according to Real Capital Analytics. The average price per unit increased 3.3% year-over-year to $87,461 for garden properties, and 7.5% to $215,254 for mid/high-rise properties. Over the same period, overall, the price per unit increased 5% to $113,494. It is predicted that over the next decade, an estimated 440,000 multifamily units may be needed each year to meet growing demands. It looks like multifamily will continue to be a hot commodity and a great asset for investors!