I think that will be a problem in some areas. Not a problem at all in other areas. It most likely won't be as bad as it sounds, either. Many of these units will never see the light of day because financing will be a challenge for those projects that don't already have it. These numbers come from approved permits, not from number of units actually under construction. A more important metric is the construction/absorption ratio. This measures how many units get leased relative to the number constructed. And looking at that ratio on a submarket basis tells a far better story than looking at a National or state statistic.
The link did not work for me. There are over 1000 MF housing markets in the US so I am sure at least one is oversupplied already. In general some of the big inner city markets are oversupplied. The small units with overcrowded corridors and elevators became very unpopular during covid and that seems to have remained.
Not anywhere west of Denver IMO. The acute housing issues in the West are the underlying issue, not interest rates or oversupply. Here in Reno we are already seeing demand snap back from the interest rate rise of 22. Tenants and buyers hopping all over that stoppage we had half of last year.
I think that will be a problem in some areas. Not a problem at all in other areas. It most likely won't be as bad as it sounds, either. Many of these units will never see the light of day because financing will be a challenge for those projects that don't already have it. These numbers come from approved permits, not from number of units actually under construction. A more important metric is the construction/absorption ratio. This measures how many units get leased relative to the number constructed. And looking at that ratio on a submarket basis tells a far better story than looking at a National or state statistic.
It's definitely feasible in some areas to see either now or in the future deliveries outpacing absorption. Builders and developers are seeing huge demand in certain areas and in some cases may overshoot how much product is built.
I think that will be a problem in some areas. Not a problem at all in other areas. It most likely won't be as bad as it sounds, either. Many of these units will never see the light of day because financing will be a challenge for those projects that don't already have it. These numbers come from approved permits, not from number of units actually under construction. A more important metric is the construction/absorption ratio. This measures how many units get leased relative to the number constructed. And looking at that ratio on a submarket basis tells a far better story than looking at a National or state statistic.
I couldn't read this article, but I've seen reputable sources say there's record MF supply in the pipeline. I believe they mean actually under construction, not merely permitted. My belief is many sunbelt markets will see deliveries outpace absorption by a large factor, leading to increasing vacancy, aggressive concessions, and negative rent growth.
Darn I'm miff'd my link didn't work. Thank you all for the replies. If you're still interested, try https://www.realestateconsulti... But it seems like the question can be approached theoretically, and you've all provided some nuance to the issue!
I know the real estate cycle is tied in large part to oversupply, and the very long lead time to completion. It's been likened to a train that takes a lot to build up steam, and slows down very, very slowly. So a little caution on the part of developers is a very good thing.
As an LP in MF syndications, my hope is that the sponsors operate in submarkets and sub-sub-markets that have some barriers to entry for new supply, thereby protecting the status quo when it comes to supply-demand dynamics. A sponsor who misreads this or who rolls the dice unluckily is liable to be swimming upstream. I say if one combines a sponsor leading LPs to a 5.8% loan with a big yield maintenance fee (fixed debt) and who also got involved in a submarket that has an overabundance of new supply coming online in the next 1-3 years, you're facing a possible "Titanic" situation....