Impending Bubble in the Multifamily Housing Sector

Impending Bubble in the Multifamily Housing Sector

Across the country, the demand for multifamily apartments is growing and this is catalyzing construction of this types of homes. Millennials are shunning away from home ownership in favor of renting because of many reasons. Investors in the real estate industry are warned from an impending mayhem in the industry which some economists articulate that it will occur in six years’ time.

Those who think investing on multifamily homes is limitless should now think twice about it. Rents will increase with time as demand surges in the volatile market but currently, the country is a hub for renters, who in five years’ time would want to own a home.

“Leaders aren’t born they are made. And they are made just like anything else, through hard work. And that’s the price we’ll have to pay to achieve that goal, or any goal.” ~ Vince Lombardi

Top Markets for Multifamily Homes

Millennials lead the multifamily real estate market with Dallas, Houston, Austin, Atlanta, San Jose, Washington, Minneapolis, Los Angeles, Calif, Orlando, Raleigh, Phoenix and San Francisco forming the hottest markets. People are moving into these cities in search for affordability and variety of lifestyle options. In Denver where the vacancy rates has been standing at 5% for some time, there are over 8,000 multifamily units under constructions. Millennials are relocating to cities like Denver because of the climate, cultural and recreational offerings not to mention the $7 billion transit system under construction. There are lower cap rates in Colorado because unemployment rate is low meaning investors have got nothing to worry about.

Shifting Family Demands

As a result of the past housing crisis, so many families in cities like Las Vegas have opted for renting in favor of home ownership which in future will cause a bubble in the multifamily sector. Millennials have also realized how liquid real estate is and the fact that they sprouted up at a time when they can’t qualify for mortgages or get good-paying jobs make the unexcited about home ownership. Rentals are scarcer today because of the housing patterns created during the housing boom meaning that the situation would soon stabilize because of the high rate of construction of multifamily apartments taking place now. Basically, most homes were converted into condominiums during the high market.

In The Long Run

There are thousands of multifamily units being constructed across the nation and if you’re planning to get in and out of the industry it might be a problem if you want to invest for a long period then the system will work for you. So long as the demand keeps pace with supply, the impending housing bubble won’t materialize. Research centers placed the national multifamily housing market in the expansion of phase of the its growth cycle and included in the cycle the record low vacancy rates which has seen demand for multifamily homes increased by 1.6% from year to year. Stats also indicate that the demand for apartment rentals is outpacing those of condos in the multifamily sector. Vacancy rates will continue to remain low in most states reaching below historical averages by next year. Most of the multifamily construction in the country are rental units.

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