Apartment Rents, Values Rising As U.S. Economy Adds Jobs
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USA Today reports that MPF Research predicts apartment rents will rise 4.3 percent this year and vacancy rates fall 1.8 percent to a 6.2 percent (and since rents are a major component of the Consumer Price Index, inflation and ultimately interest rates are on the way up). Magnifying that rise is their respective forecast of just 40,000 new rental units being constructed this year. My blog posting in March showed permits going back to 1980. Single family dwelling make up half of the U.S. rental housing market. 2010 was the least amount of residential construction since prior to 1980. Keep in mind, however, that many markets remain overbuilt from the frenzy of 2005-2007.
CoStar reported a 36 percent increase of multifamily sales activity in the first quarter of 2011 versus Q1 2010. Distressed sales represented 21 percent of all multifamily transactions in the first quarter of 2011.
Curtailed lending, increased down payment requirements, disappearing housing assistance programs and more stringent borrower qualifications will continue to erode homeownership rates and increase the number of percentage of Americans that will be renters. The trend of the times is echoed in ongoing and growing spending cuts for housing assistance and homeownership programs, as reported by MarketWatch April 25th, 2011.
The Mortgage Bankers Association reported a 44 percent increase in commercial and multifamily lending in 2010.
The bottom line is that demand for rental housing is rising in an economy that is finally adding jobs. Liquidity is returning to commercial lending (albeit at much more stringent terms), rents are rising and multifamily property values are going up in most markets.