Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
I just came across this article from Calculated Risk (the article is about a year old so here is the latest data.) which suggests that MF demand will start to shrink due to increased supply from new building and decreased demand from those aged 25-39, who will make up the top three age brackets in 2020, who will enter their prime home buying years.
Considering the cap rate compression and the amount of new starts in all the major cities what do people think will happen to values in the next 5-10 years?
Laws of supply and demand suggest that value should go down, but I don't spend that much time studying MFH so I'm curious to hear everyone's thoughts, particularly those syndicatiors or anyone else who deals in the 100+ units across the country.
Eventually millennials will either accidentally or purposely start having kids. Whether it be by renting SFHs or buying homes sooner or later they are going to want to get their kids out of the apartment complexes. These same millennials are also currently watching interest rates slowly rise and real estate values steadily climb. Maturity will eventually set in and the progression to the suburbs will start. Contrary the what the media says the economy is getting much better. Barring a massive plague or nuclear war SFHs should stay in demand. Class A apartments not so much. Just an opinion.
According to the Greater Houston Partnership, despite a negative 10,000 in domestic population in Houston in 2017 (mainly due to oil/gas job losses), there was a positive 43,000 international and a net positive 33,000. International migration is growing substantially and Houston is now considered the most culturally diverse city in the U.S. (most rent since they can't qualify for home loans).
So as you say, whether its due to millennials or immigrants, population is growing in the rental markets (at least in Houston). This was validated from a local property management company I just spoke with today that said they are definitely seeing an uptick in rentals well after the Harvey recovery. Not sure about the rest of the country, but Houston is looking strong for multifamily rentals.
Also, according to Marcus & Millichap's 1Q18 MF market report, new construction deliveries for MF will fall nearly in half in 2018. 4Q17 population ages 20-34 is 22% (U.S. 21%) with 42% of all households rent.