While sluggish sales in the single-family home market are capturing headlines, the hidden story of 2011 is proving to be a strong rebound in the multi-family rental markets, with decreasing vacancy rates and rising rents. Tied to the move of former homeowners back into the rental markets, as well as the pressure of possible homeowners remaining in the rental pool, owners and builders alike are scrambling to accommodate the new realty reality, where rentals are currently king.
Multi-family, which includes both apartment and condominium buildings, is making optimistic waves in the otherwise grim real estate sector, according to a recent release from the National Association of Home Builders (NAHB). Results from the NAHB’s 2010 4Q “Multifamily Production Index” shows that developer sentiment for these projects is at its highest since 2006, suggesting that those developers are predicting strong returns at the market-rate level.
In tandem, vacancy rates, according to the NAHB “Multifamily Vacancy Index”, are at lows not seen since 2006, and have dropped fifty percent from levels seen in late 2009. Pent-up demand and continued malaise in sales of single-family dwellings mean that vacancy rates may well continue to drop, pushing rents higher in cities and towns across the country.
According to a Census Bureau survey released earlier this year, the national rental vacancy rate stood at 9.4 percent in 4Q 2010, a drop of 1.3 percent from 4Q 2009, when vacancy numbers peaked at 10.7 percent. The last time the national rental vacancy rate was this low was in 2002.
NAHB officials suggest that while developers are anxious to address the growing demand, continued financial headwinds may belabor projects, pushing rental rates higher for the next few years. More information on the NAHB Multifamily Market Index can be found at their website.
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Not only is the rental vacancy rate high across the country, but so is the home vacancy rate in general. I know here in AZ the vacancy rate for houses is above 10%.
There is a new study by Deutsche Bank citing the top 10 cities with the most affordable housing. CNN Money also posted an article about the real estate market in general and the time to buy.
A lot of investors I’ve been working with have been leaning more towards the multi-family units. For some landlords, It makes sense to manage tenants all living in the same property than buy many single unit properties throughout the city.