March 31

Wait for the Win-Win

Wait for the Win-Win
I’ve said it before and I’ll say it again: if you want a different take or opinion on the same study or statistics, just hire a different economist. But for those involved in the investment, acquisition and operation of multifamily housing, the recent “Cost to Rent Growing at a Slower Rate” article is not only inline with expectations but reasonable considering the growth of recent years.

In November 2015, we held our 2016 Multifamily Forecast at the Apartment Association of Orange County and the outlook was unanimous: the growth would continue, but pared down from the 5% to 7% growth rates of 2013, 2014 and 2015. Instead, the expert panel predicted growth in the 2% to 5% range and for good reason. Most of the growth of previous years was the result of an increasing renter base and limited available inventory.

With the for sale market growing out of reach for many and an over regulated SFR lending market preventing would-be homeowners from obtaining financing, an improving local economy helped rental rates rise and in some sub-markets, surpass the previous high watermark set before the Great Recession. Today, rental rates and occupancy are up, but in addition to the tens of thousands of units available today for rent (based on 3% market vacancy) and the thousands of units being brought to market, there are value options for renters.

If you’re frustrated and following along at home, give it another two to three years and the craziness in both the local real estate and rental markets should settle down. Increased development, impending interest rate increases, a Presidential election and more should cause the market to soften, creating greater value for renters and investors alike.