Multifamily Real Estate Market – 7 Fearless Predictions for the Future

by Spencer Cullor on December 5, 2012

Crystal Ball

Multifamily Real Estate Market – 7 Fearless Predictions for the Future

As the year quickly comes to an end, we’d like to take a look into our crystal ball at what the future holds for the multifamily real estate investment market.  To do this, we’ve compiled information from various industry sources from around the US and want to highlight some of the key findings with you.

7 Fearless Predictions for the future Multifamily Investment Real Estate Market:

  1. Multifamily sector expect to continue growth through 2015 and beyond.  According to Freddie Mac, the multifamily market is predicted to keep growing through at least 2015, but the growth is likely to continue through at least 2020.
  2. The multifamily sector growth and sales will continue to dominate all other real estate classes including commercial and single family homes.  According to industry research, the multifamily investment market is predicted to continue to lead the way across all real estate sectors including commercial and single family homes.
  3. Multifamily sector will add 1.6-1.7 million new renters by 2015. Freddie Mac predicts that if the economic recovery remains slow, new demand will reach 1.6 million and if the recovery speeds up, demand will increase by 1.7 million renters.
  4. Percentage of renters in the US will increase from 34% to 39-42%.
  5. Multifamily demand will continue to outpace new supply.  Slow current multifamily construction pipeline of around 200,000 this year will not keep pace with increasing demand.  In addition 1-2% of current properties become obsolete each year and need replace increasing demand for current multifamily properties.
  6. Home ownership rates will drop an additional 1-2% if slow economic recovery continues.
  7. Rent growth, low vacancies, and increasing values for multifamily investment properties will continue into the foreseeable future.

So, now that we have made these predictions based on industry research, what is fueling this growth?  Let’s look at a few of the key factors to continued multifamily growth.  These key factors all drive additional demand to multifamily rental housing.

  1. High consumer and student loan debt
  2. Flat to modest household income growth
  3. Shifting job opportunities
  4. Delayed Baby-Boomer retirement
  5. Reduced discretionary income
  6. Continued shift to urban areas.
  7. Tougher home-loan qualifications.

Predictions are fun to make, but what does this mean to our investing business?  We are moving forward and continuing to evaluate and buy multifamily properties with solid fundamentals and that have strong upside potential.  No one can predict the future, but the current market fundamentals all point to great things in store for the future of the multifamily investment market.  If our property’s performance this year is any indication of the future and where the market is heading, we feel great about the future’s potential.

Have a great end to 2012 and an amazing start to 2013.  If you currently own multifamily real estate or plan on owning some soon, your future is bright!

Prediction Sources

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