Apartment Rental Market Predictions

After reading this morning's news watch from the NMHC, I spoke with Mike Kelly of Caldera Asset Management about the predictions he made for the apartment rental market as a whole, from an investor and ower's perspective.

The featured article, 'US Multifamily Rents Could "Explode" in Three Years.' Naturally, we wanted to determine whether this was the good or bad kind of explosion. The article, however, goes on to explain that by "explode" they mean that on a nationwide scale, rents are expected to decline for at least another year and a half, after which rents may climb to higher levels, but wouldn't exceed the rents of 2005 through 2007.

Caldera Asset Management co-founder Mike Kelly explained that lenders are only giving loans and basing credit lines based on currents rents (and therefore values) instead of future values, as was common before 2007.

This should have two effects: one, that there will be no new construction to offset rental demand when the economy begins to grow again, and that as a result, rents should be rather strong in 2011 going forward; two, that since credit lines are being adjusted to values based on current rents, then "apartment owners should be 'very realistic' about the prospects of their assets going forward." Since many owners are still holding onto their assets, now may be a good time to sell, as 18 months of declining rents will surely bring many properties to the auction block, increasing that supply and lowering prices even further.