Multifamily Housing Sector Reaches Inflection Point as Apartment Rent Growth Shows Signs of Weakening

Multifamily Housing Sector Reaches Inflection Point as Apartment Rent Growth Shows Signs of Weakening

SILICON VALLEY, CA - Ten-X Commercial, the nation's leading dynamic and data-powered online commercial real estate transaction platform, released its latest U.S. Apartment Market Outlook, including the top five 'Buy' and 'Sell' markets for multifamily real estate assets. The long-term forecast shows that after years of booming growth, the multifamily sector is beginning to hit its inflection point with national rent growth decelerating and vacancies creeping upward.

The Ten-X Research report identifies Sacramento, Raleigh, Riverside-San Bernardino, Jacksonville and Fort Worth as top markets where investors should consider buying multifamily assets. In these regions, demand for apartment rentals continues to be driven by household formation coupled with a dearth of single-family starter homes for purchase. 

San Francisco, San Jose, Oakland, New York City and Miami are the top markets where market conditions might cause multifamily investors to consider selling their properties. These cities face rising vacancies and flattening rents, as a flood of new supply is hitting the market following years of development.

Ten-X Commercial's research team notes that nationally, multifamily completions look to exceed 260,000 units for the second straight year, while absorption will be approximately 200,000 units for the fourth straight year. As a result, vacancies are forecasted to rise in 2018 and beyond. In a modelled cyclical downturn from 2019-2020, vacancies would approach 6.0 percent in 2020 before an economic recovery in 2021 brings renewed demand.

Rent growth will remain at three percent in 2018 before slowing, yet remain positive during the modelled recessionary years. Ten-X sees this down cycle as more benign for the apartment sector than previous downturns when rents actually declined.

"All good things come to an end, and this truism is now to become manifest in the multifamily sector where the long-anticipated turning of the cycle is underway," said Ten-X Chief Economist Peter Muoio. "Developers have spent years betting on the shift in preferences towards renting and living in walkable urban downtowns. Now the critical mass of supply deliveries is weighing on the sector. While the downturn's effects should not be cataclysmic for multifamily owners in most markets, there's no denying that the sector's outlook is distinctly grayer than a year or two ago."

U.S. apartment rents rose 3.3 percent over the past year — a fairly healthy pace, but a clear deceleration from the nearly 6-percent growth rate enjoyed in late 2015 and early 2016. The sector's overall deal volume totaled $41 billion during the third quarter, an 11-percent increase from the same period in 2016.

Source: Ten-X Commercial / #Multifamily #Apartments

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