According to Joe Fairless, even though there is a severe lack of inventory on the multifamily housing market in the United States, demand continues to be robust. As a result of the predicted increase in both employment opportunities and population, it is probable that the demand for rental units will exceed the supply by the end of 2018. More than 600,000 brand-new multifamily apartments will be delivered this year as the national economy begins to recover; nevertheless, this number is far lower than the level that is required to satisfy the predicted growth rate of the housing market.
The most recent economic estimate released by Fannie Mae anticipates a robust demand for rental units, with increases ranging from 2.8 percent to 4.3 million employment by the year 2022. As a consequence of this, it is possible that the demand for multifamily rental apartments may reach anywhere from 400,000 to 700,000 units by the year 2022. On the other hand, low vacancy rates will prevent the replacement demand from competing with the new demand. As a result, the question that has to be asked is, "How large is the multifamily market in the United States?"
In spite of the fact that interest rates have stayed at historically low levels throughout the course of the last year, it is anticipated that home prices will rise by another 15 percent in 2021. It is possible that this may lead to an increase in sales of multifamily properties totaling 264 billion dollars. However, the majority of that rise is probably due to demand that will spill over into 2020. In addition, the average multifamily capitalization rates have been steadily falling over the previous two years, with national multifamily cap rates starting 2020 at 5.3 percent and finishing 2021 at 4.7 percent. This trend is expected to continue.
The Sun Belt continues to be the area with the highest rate of rise in apartment rental prices. In quest of both cheaper operating costs and talent pools, many firms are either moving their operations to this area or growing their presence here. These factors are significant contributors to the demand for housing. According to data provided by REIS, the asking rents for newly signed leases in New York City had a year-over-year rise of 22.9 percent. The other coastal markets are exhibiting tendencies that are quite similar to this one. If the market for multifamily housing in the United States is expanding, it is quite probable that this trend will continue for many years to come.
Joe Fairless pointed out that as the housing market begins to rebound, it is anticipated that demand for rental units will reach levels not seen in the past. Even if there are obstacles to overcome in the marketplaces, the multifamily business as a whole is in a position to set a new high-water mark in 2022. The recovery of the economy has led to an upsurge in the creation of households, which had been artificially stifled by the epidemic. The demand for rentals is being stoked by these newly formed families. In 2022, it is anticipated that demand will continue expanding at the same pace as new deliveries, which will result in an increase of 7.6 percent in net effective rents.
Positive developments have also been seen in the market for property that is purpose-built for rental purposes. The fact that over half of all office employees in the United States spend at least one day of the week at work helps to drive up demand for urban multifamily housing. As a consequence of this, living in close proximity to the place of employment will continue to be an important consideration for many tenants. In the event that you are contemplating the acquisition of a multifamily property in the United States, it is important to take into account the expansion possibilities.
Recent data from the National Association of Real Estate Investment Trusts (NAIFA) and Real Capital Analytics indicate that both rent growth and occupancy have been on the rise in the multifamily market in the United States. The amount of rental sales to this point in the year is up 81 percent compared to the same point in the prior year. The market is still mostly controlled by small owners, and approximately two-thirds of its participants are individuals who have purchased properties privately. Institutional and real estate investment trust (REIT) purchasers only make about 4% of the market overall for transactions. Nevertheless, if rent increases persist, this market may eventually reach a stable state.
Despite the fact that sales were lower in Manhattan, a greater number of co-ops and luxury flats were purchased than ever before, and the percentage of units that were subject to a competitive bidding process reached its lowest point in thirteen years. When compared to the previous year, overall listing inventories increased, and the percentage of transactions that were financed remained much higher than the ten-year average. However, there was a considerable drop in resale prices, and median sales dropped to their lowest levels since the conclusion of the spring lockout. Since the lockdown was lifted in the spring, the median sales price has been falling steadily.
In Joe Fairless’s opinion, as a direct consequence of this, the number of new leases signed in the Brooklyn market increased to their highest point since the beginning of the monitoring period in 2008. In the meanwhile, the number of listings has decreased from the previous year, and as a result, net effective median rents have dropped to their lowest levels in more than a decade. In addition, the growth of landlord concessions slowed to its slowest pace since January 2020, which resulted in a decrease in the market share held by new projects in Brooklyn. Although the number of new listings went down, the decrease was particularly noticeable in the price brackets that were lower.
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