Tuesday, February 21, 2017

Peak Renter

by Bill McBride on 2/21/2017 12:26:00 PM

It was six years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive.

The drivers were 1) very low new supply, and 2) strong demand (favorable demographics, and people moving from owning to renting).

Demographics are now somewhat less favorable, and the move "from owning to renting" is mostly over.   Multi-family construction peaked in June 2015 (as I noted at the time), however more supply than demand has still been coming online.

Note: The NMHC market tightness apartment survey has been indicating looser conditions for five consecutive quarters.

Today, from Laura Kusisto at the WSJ: Banks Retreat From Apartment Market

Swelling supplies of apartment units are prompting big banks to pull back from new projects, forcing developers to scramble for capital, in a sign that the U.S. apartment industry headed for a downturn. ... fresh supply is beginning to overwhelm demand. More than 378,000 new apartments are expected to be completed in 2017, a 30-year high, according to real estate researcher Axiometrics Inc.
I expect the vacancy rate to increase and for rent increases to slow.