Assuming current trends hold, over the rest of this decade, we will need at least 300,000 new apartments annually, and possibly as many as 400,000, to meet demand.
San Fancisco, CA (PRWEB) January 04, 2013
While apartment builders are currently pleased with the 250,000 additional units being added at an annual rate currently, the National Multi Housing Council feels that these numbers could rise dramatically once we are past the fiscal cliff issue in the U.S. This is in contrast with other analysts who feel that the 250k mark is just about right for current and near term future conditions.
“Assuming current trends hold, over the rest of this decade, we will need at least 300,000 new apartments annually, and possibly as many as 400,000, to meet demand,” says Mark Obrinsky, vice president of research and chief economist for the National Multi Housing Council.
Obrinsky feels that apartment demand will soon recover to be as strong as it was pre-2008. While that suggestion may not be too radical, the current chaos in the financial markets and on Capitol Hill make a descent back into recession a real possibility for 2013. That would of course put a dent in any growth plans for multifamily construction. It seems as if uncertainty continues to plague us at every hint of an upturn.
Despite the economic challenges, demographics indicate that demand for apartments will continue to grow. Over the coming 5 years, the group most likely to rent apartments (20-34 year olds), will grow by 2.4 million. This is the fastest growth rate for this age bracket since the early 1980s. Rising immigration promises to add to these numbers and will continue to “significantly surpass new construction of rental units,” according to analysis from Marcus & Millichap.
Over the past several months developers have been taking permits for multifamily housing at a rate of 250,000 per year. November’s permit rates jumped to 296,000, which is double the amount of construction just after the recession. Economists who study housing and construction expect modest and continued growth in this sector through 2013.
“Apartment construction and financing has definitely been picking up steam as far as we can tell at the Off Market Association. Better financing options and investors who are looking for stable returns have given impetus to the market and barring a fall off the fiscal cliff, we expect this to continue to increase during 2013,” said Terry Robinson, President of the Off Market Association and Genesis Capital (and its division the Small Balance Multifamily Group.)
Prior to the Great Recession it was normal to see new construction of multifamily units surpass 300,000 per year. A push towards 400,000 yearly units will require a significantly stronger economic recovery than we have experienced thus far. The largest driver of this increase would be new household formation, which has been the weakest in U.S. history during the 2000-2010 decade. This was a result of the Great Recession, which put a damper on immigration and also caused many households to double up. A return of new household formation to a 1.2 annual percentage rate will certainly raise demand for apartments. Obrinsky predicts that this level of new household formation could lead to as many as 437,000 new units per year. “Financing constraints, rising construction costs and traditional NIMBY opposition could keep actual construction below that level,” says Obrinsky.
About The Off Market Association
The world is changing and has changed. Old ways of doing business don’t always apply. The Off Market Association (OMA) brings a new, exciting and visionary way to do business to all our members.
OMA uses a cutting edge technology and platforms, a deal desk, and extensive contacts across the US for commercial real estate transactions, bank note sales, small business advising and SBA loan services. The OMA is affiliated with Sunovis Financial and Genesis Capital to provide investors with access to capital and quick financing.