globest.com -- WASHINGTON, DC—Fundamentals in the multifamily space should continue
their golden trajectory for several more years, based on the latest numbers about US homeownership from the US Census Bureau.
Indeed, coupled with other recent reports on multifamily dynamics, it
is safe to call the asset class bullet proof, at least for the medium
term. US home ownership, of course, has been steadily falling since the
Great Recession. On Tuesday, though, it hit a low that gives one pause
-- to say nothing of putting it within spitting distance of
awe-inspiring benchmark. US homeownership is now at 63.4%, which is the lowest level of home
ownership in this country since 1967. There is little to suggest it
won’t stop falling: in Q1 it was at 63.7%. In 1965, when the government
started tracking home ownership the level was 63% -- a percentage that
seems like it is but a few quarters away again.
At the same time rental vacancies are also, not surprisingly,
dropping to new lows. The Census Bureau also reported that rental
vacancy rates were 6.8% in Q2, a 30-year low. You don’t have to have the resources of the US government at your
disposal to predict how this will play out: multifamily rents will rise
and supply will continue to enter the pipeline. Reis, for example, reports that it is expecting "a
flurry of new buildings to come online in the second and third quarters
of 2015, as developers schedule openings to take advantage of the
strongest leasing periods of the year." That number, actually, is
100,000 units and updated project numbers suggest that this alone will
see 230,000 units having come online all together. This may result in relatively minimal increases in vacancies for the
rest of the year, it said, but overall the national vacancy rate --
which Reis puts at 4.2% right now -- will remain very tight, rising to
4.8%, a figure that "does not seem like cause for much worry."
A Five-Year Run
In mid-month Reis predicted at least another five years remained in
the current apartment cycle and the latest Census Bureau's numbers
support that. "We do not believe that Millennials will continue to rent for the
rest of their lives, but postponing the decision to have children and to
buy homes will imply another good five to ten year run for apartment
landlords, during which only the oldest of the Millennials will become
homeowners," it said in its Q2 report.
