A new report analyzing the market shows that the multifamily market cycle is continuing strong as young adults and retirees choose to live in apartments.
The strong job growth plus the choice to live in apartments, Yardi Matrix says in U.S. Multifamily Outlook for Winter 2019, means “2019 should be another good year for the multifamily industry,” despite the fading impact of the 2017 tax reform and potential trade disruptions.
Rent growth trends show young adults and retirees like to live in apartments
“Fresh off another year marked by steady improvement, the rental sector looks to extend what is already a prolonged market cycle,” the report says.
“With year-over-year growth crossing the 3.0% mark nationally in 2018—slightly above initial expectations—the multifamily sector showed that it still has some legs going into 2019. We expect rents to continue to rise in 2019, at a rate of 2.8%, marking another year of consistent improvement.
“The market is underpinned by strong demand based on household formation that tops one million annually and positive employment growth. The number of young adult households is continuing to rise, families are remaining renters longer than they did in the past, and some retirees that sell homes with expensive property tax burdens are turning into renters,” the report says.
Supply of new apartments
“Development activity will remain strong in 2019. We expect deliveries to come in at about 300,000 units this year, 2.2% of total current stock and largely in line with 2018 totals,” the report says.
“This will mark the fourth year in a row of completions in the 300,000-units range, which is entirely appropriate given the strong demand that we expect to continue for another few years
Multifamily takes a larger share of total housing construction
“Another factor boosting multifamily development is that it is taking up a larger share of total housing construction,” the report says.
“Single-family construction is lagging, in part because rising costs make it difficult for developers to build at entry-level price points, which are in more demand than large suburban homes.
“With a wider availability of rentals and fewer costs attached to renting, that dynamic is likely to continue. Millennials, which now represent the largest population cohort in the labor force, are starting to buy their first homes, but affordability is a problem due to student loans and rising mortgage rates. Their propensity for technology- and entertainment-driven markets is effectively pricing some of them out of home buying,” the report says.
The data presented in this outlook is provided by Yardi Matrix, the data and information service for real estate professionals. Email or call them at 480.663.1149 to learn more and schedule a demo of the industry’s most comprehensive market intelligence service.