Multifamily-type dwellings have paved the way to smart and practical living. There can be a lot of options as to where to invest your hard-earned money, yet it is always fruitful to consider the ones that have long-term potential — specifically the housing and property industry.
The occupancy rate of multifamily buildings in 2019 reached a peak of 96.3%. This high occupancy rate is despite the growth of available units by 3% each year.
Properties under such housing categories are surging in different parts of the world, indisputably in the United States of America. The National Apartment Association claims that the country needs to acquire another 4.6 million multifamily house units by 2020 to meet the demands of dwellers and investors who are thrilled to engage in the development assets.
All these numbers are from before the Coronavirus Pandemic, and that should be exciting to investors because this is one of the few investments that shouldn’t see a negative fallout, people still need a place to live, and with more people than ever working from home, they’ll need to invest more into their homes in the coming years.
Here’s a list of the top 4 multifamily trends that will make you wealthy, whether you invest yourself or use a trusted commercial investment company.
1. New apartment construction’s inability to meet demands
A total of 225,000 rental units were built ready for occupancy in 2019. However, the recent count is not proportional to the increasing demands every year. Developers predict that the increase of prospective buyers and investors could continually rise for the next ten years and beyond. To accommodate these escalating bids there is a need to build 800,000 units
The imbalance of data in multifamily apartments is significant in driving target settlers’ occupancy and rental options. The lapse of time that developers are setting is considered a wise and smart move in helping the industry prosper.
Construction lags are seen as a “recovering economy”. The halted new apartment projects will eventually open, expecting an expansion of 4% of all the available units.
2. Two large generations turning to rentals instead of homeownership
Baby Boomers and Generation Y are the two cohorts that changed the game in independent living. It has been observed that Baby Boomers are more likely to turn to rental properties rather than homeownership. The same goes for Generation Y individuals — who are also contributing to the rental surge.
Modern lifestyles have shaped the current generation and encouraged them to walk away from the norm of owning property. A Freddie Mac Multifamily released research tackled the evident rental behavior among the two generations. According to the research, 73% of Baby Boomers believe renting is more practical than buying a home. Following the number of the elder group, Generation Y runs with a percentage of 31%.
The main concern and reason for the shift is affordability. According to the study, renters believe that their economic situation has improved since they decided to choose rentals over homeownership. Consequently, the rental surge today fuelled the growth of commercial real estate under the multifamily sector.
3. Increasing demand but decreasing vacancies
Reducing apartment vacancies increases the demand by around 5% in many multifamily residences. From the previous track record of 4.6%, Moody’s Analytics REIS revealed that the said vacancy rate for apartments will escalate in the third quarter. Most firms are crossing their fingers for a major climb of 5.4% by the end of this crisis until the year 2021.
Furthermore, the rising rental trends attract people who are looking for a wider selection of housing. It also lowers the markets’ cost. Such demographics boost the rental housing market value, which is one of five features of every great multifamily market. Effective renting is a measure that developers use to determine the surge of apartment demands.
4. More are leaning into renting instead of homeownership
Homeownership levels is the term that describes the ratio of those who rent to those who own. For seven consecutive years, homeownership has been on the verge of decline, and development experts foresee that the trend may continue. According to a survey, the number of Americans owning a home was at its lowest peak in 15 years.
As a stark contrast to the fading surge of homeownership, there were 1,000,000 renters who set foot in the market during the same year. The dramatic shift started in the year 2016 when 4,000,000 households turned to rentals.
Make Informed Decisions
Societal and environmental factors, coupled with new changes in behaviors, have made drastic impacts on the housing and property industry. With these new trends completely changing the game for multifamily investors, it’s safe to say that there’s bound to be a significant increase in cash flow and ROI. You want to make sure you make informed decisions and fully evaluate each investment property before investing money into them.
