Multi Family Outlook

The longer term outlook for apartments remains good.

In 2008 sales was down by more than 60% over 2007 peak with sales volume dropping by 77% over same period a year earlier. The big banks are beginning to loosen up and the insurance companies have become active lenders again, but at a fraction of the earlier activity. Investment homes constituted 17 percent of all home sales in 2009 compared to 21 percent in 2008.

The apartment  sector is optimistic, partly because of capital provided by Fannie Mae and Freddie Mac. Its political. Congress has been concerned that multi family housing going into foreclosure makes victims of renters. They didnt borrow or speculate and yet they are losing their home. So, Fannie Mae and Freddie Mac have been directed to keep the spigots open for multi family. Price Waterhouse Coopers annual survey points to investor expectations that rents will climb on average of 2.41% annully for the next eight years, in spite of the dismal vacancy rates we are seeing today.

What Drives Apartment Occupancy
Favorable Trends

Jobs: Full recovery of occupancy and rents requires job growth. Now that we are beginning to create jobs and consumer confidence is stronger we should see above average rent growth.

Sales Volumn: This quarter saw a continued uptick in sales volume and equity financing, which
represent another step, albeit a small one, toward a more normal transactions market, after 2009 recorded the lowest number of transactions of the  decade, said NMHC Chief Economist Mark Obrinsky. (Via NMHC web site)

Demographic: trends are favorable for the apartment market over the next decade. The number of renters has increased to one-third of all households. In 2008 renters accounted for 63% of all new households, echo boomers are expected to boost that number to 67 million new renters by 2015. Retirees are moving into city complexes where everything is close by and more accessable coupled with low housing supply all point to increasing rent rates.

The apartment industry maintains that multifamily delinquency and default rates for Fannie Mae and Freddie Mac remain under .05%.

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