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Are Multifamily's Best Days In the Past?

Are Multifamily's Best Days In the Past?
With the way that the real estate markets have fluctuated over the last decade - from strong and steady to a full-blown recession - it’s no wonder that some multifamily investors and other industry professionals have undoubtedly asked themselves, “Are our best days behind us?” The short answer? No way. Here’s why… Across the country vacancy rates are steadily decreasing, rental rates are on the rise, and new construction is breaking ground at an impressive rate. Looking at the Marcus & Millichap’s 2014 National Apartment Overview, we see that national vacancy rates for multifamily sector are expected to reach 5.1% in 2014 mostly because of the 215,000 new multifamily units under construction this year. In addition, the reports project that rental rates will increase by another 2.6% over the 4.2% we saw in 2013. From Seattle to Miami and San Diego to Colorado, the multifamily markets are booming as an aging demographic is moving from single family units into easier-to-maintain multifamily units and a coming-of-age demographic is branching out on its own for the first time. According to the experts, we shouldn’t look for the multifamily market to slow down anytime soon. As a matter of fact, these experts feel that when the time comes we will see a “tapering off” when interest rates begin to rise, but that shouldn't happen anytime within the next 3-5 years. Described as a “feeding frenzy”, both developers and commercial lenders seem to share the experts’ opinion, citing that a large percentage of their investments and partners still regard multifamily as a valued and necessary part of t......
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Freddie Mac's “New Normal” Looks Like Uncertainty

Freddie Mac's “New Normal” Looks Like Uncertainty
The Freddie Mac Multifamily Midyear Outlook for 2014 contains some points that desperately want to be positive, paired with some estimates and forecasts that paint what could be a very different picture for the multifamily housing market. The take-away seems to be that we should expect volatile market conditions to continue into the next year or so, prime time for investors to do minimal capital improvements in preparation for eventual increased market demand. The report reveals that, by all estimates, more than 3.9 million new households should have been formed during the Great Recession, weren't. Whether that's a result of the shifting cultural landscape or symptomatic of a “failure to launch” generation, prognosticators tend to assume that the trend won't continue and that Millennials will start setting up house on their own as they find jobs. Younger households are more prone to renting, especially now that housing starts are low and home loans are harder to get. Freddie Mac's Steve Guggenmoss says multifamily investors should expect to feel a pinch in the next few months as occupancy rates drop. In the face of such guarded optimism about those Millennials finally “launching” and getting their own jobs and places to live, that warning looks more like the agency is taking a “wait and see” approach to what's coming down the pike for multifamily housing. Basically, there are two possibilities for the market: Scenario 1: Steady Economic Recovery Millennials currently living with their parents get jobs, keeping a 13-year-low occupancy rate near 4.1 percent or ......
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Fannie Mae has its Say: Multi-family Overview for 2014

Fannie Mae has its Say: Multi-family Overview for 2014
Healthy in 2014. That’s the report from Fannie Mae on what’s to be expected of the Multifamily Property Market in the coming year. It’s a trend we saw in 2013, even at times when it was least expected. In fact, the Federal National Mortgage Association reported continued rent growth and sustained occupancy levels through the end of the year, a time when both have a tendency to dip. Keeping with the trend, Fannie Mae says 2014 holds much of the same, with both tenants and property owners demonstrating a continued demand for the industry. The best news? Looking at the graph provided by the agency, vacancies from now until 2018 are predicted to see very little change, with the first multi-year sustained vacancy rate since 1995. What’s the Driver? Wondering about the source of this trend? Job growth, of course, takes the bulk of the credit. The following numbers have been forecast by Fannie Mae’s Economic & Strategic Research Group: 6.4 percent unemployment rate by the end of 2014 1.9 percent increase in nonfarm payroll in 2014 and up to 2.0 percent in 2015 An increase in household formations is expected to increase demand for rental units Some More than Others As Fannie Mae details—and from what we know to be true—not all areas of the country have seen or will continue to see this positive trend. In fact, particular areas of the country that ‘carrying’ others—bringing up the average for the whole. What’s interesting is comparing the metropolitan areas expected to see positive jo......
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Apartment Markets Resume Growth According to NMHC Survey

Apartment markets improved across all areas according to the National Multi Housing Council’s (NMHC) April Quarterly Survey of Apartment Market Conditions. All four indexes – Market Tightness (54), Sales Volume (55), Equity Financing (56) and Debt Financing (59) – came in above 50, which indicates improving conditions. This reverses last January’s findings, where Market Tightness and Sales Volume dipped below 50 for the first time since 2010. “The apartment industry is operating on cruise control, as the expansion continues unabated,” said Mark Obrinsky, NMHC’s Vice President for Research and Chief Economist. “While concern about overbuilding has begun to crop up, demand for apartment residences remains strong. New construction may have finally recovered fully, but most units under construction won’t be delivered until 2014 or later. The dearth of recent completions has contributed to relatively low product availability. As deliveries increase, we expect to see an even greater pick-up in sales volume.” Key findings include: Financing remains constrained. One in ten reported construction financing as available for all types of apartments in all markets. In addition, only one quarter thought acquisition financing was available for all properties in all markets. Market Tightness Index rose to 54 from 45. The index has been above 50 for 12 of the past 13 quarters, with only January 2013 indicating contraction. One quarter of respondents saw markets as tighter, up from 16 percent last quarter. The Sales Volume Index increased to 55 from 49. Like the Market Tightness Index, the pickup in the Sales Volume Index showed improving co......
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