In November 2018, the real estate industry held its annual multi-family real estate investment conference to examine the state of the industry and project what the coming year might bring.
At that conference it was revealed that consumer confidence is at an all-time high, partly because the economy has now sustained 97 months of consecutive job creation, which amounts to the longest sustained period in U.S. history. With annual wage growth at a healthy 3% in the U.S., it is expected that renters will be able to pay higher monthly rates for housing.
Demographics and multifamily real estate investment
The millennials of this country are now entering their late 20’s and early 30’s, which is a prime age for renters, and that will serve to increase the demand for apartments during the coming year. Many of the same millennials are also approaching the age where they will have first and second children, which may trigger a migration from urban housing into suburban situations. With the unemployment rate of millennials holding steady at 4.5%, it seems likely that this particular demographic will have the strongest influence on multi-family real estate investment opportunities for the coming year.
Supply and demand
Another big topic of discussion at the real estate conference in November was the historical relationship between the formation of households and new housing supplies. A housing boom which took place in the first few years of the new century, resulted in a surplus of housing between the years 2000 and 2007. However, following the recession of 2008, a surge in the formation of households has caused a shortage of at least 2 million units on the market, and that has made for a very tight rental market.
There are a number of factors which are contributing to make it difficult for construction companies to continue building starter homes, so instead the renter population is being significantly increased, especially in urban centers. What this means is for people under 35, the home ownership rate has decreased from 43% in 2007 to 37% currently. What all this indicates is that there is likely to be a strong shift toward multi-family real estate investments for the coming year, to support the increased population of renters, as opposed to young households purchasing starter homes.