Multifamily Demand Sets New Highs in Q1

 

In a world of growing uncertainty, there’s one thing that seems dependable, at least in commercial real estate: the need for housing keeps rising. First-quarter data from RealPage shows historically unprecedented demand, occupancy, and rents in the multifamily market.

Net demand for apartment space hit 712,899 units over the 12-month period ending in March 2022, according to the firm. “That’s 8% more than the previous high set one quarter earlier, and 76% higher than the pre-COVID-era peak set back in 2000,” the report reads.

Although occupancy usually falls a bit in the first quarter, it increased 10 basis points to 97.6%. Year-over-year rent growth in new lease asks was 15.2% in March. Florida dominates the markets as eight out of ten of the largest year-over-year areas for rent growth. Out of the Sun Belt, New York hit the top spot for net demand. “Similar trends were seen to a lesser degree in other big coastal markets like San Jose, San Francisco, Oakland, Los Angeles, Seattle, Northern New Jersey, and Washington, DC,” the report noted.

“Young adults benefiting from a tight labor market and unprecedented wage growth are flooding the apartment market,” Jay Parsons, head of economics and industry principals at RealPage, said in prepared remarks. “Normally, you’d expect rent growth of this magnitude to stifle demand, but instead the opposite is occurring. There’s a severe shortage of rental housing at all price points and in essentially every city across the country.”

Perhaps because there’s been a severe lack of housing construction for years according to professional groups. Real estate economics consultancy Rosen Consulting Group and the National Association of Realtors noted last year, “While the total stock of US housing grew at an average annual rate of 1.7% from 1968 through 2000, the U.S. housing stock grew by an annual average rate of 1% in the last two decades and only 0.7% in the last decade.” And the National Multifamily Housing Council reports that the sector needs to build an average of 328,000 new apartments per year at a variety of price points to keep up with demand. “We’ve only hit that mark three times since 1989,” it said.

Combining this with the long-term lack that others have reported is the accelerating costs of construction, according to RealPage. But currently, owners and operators can push costs along. “We wouldn’t see this huge surge in apartment construction if not for wage growth empowering renters to absorb the cost increases through higher rents,” says Parsons. “Ultimately, rents and home prices are both surging right now primarily due to housing shortages, and we need more housing of all types to support long-term affordability and availability.”

---

Source: Multifamily Demand Sets New Highs in Q1

https://www.creconsult.net/market-trends/multifamily-demand-sets-new-highs-in-q1/

ESG and Future of Real Estate panel discussion

 

Environmental, Social and Governance (ESG) scores have become a hot topic in real estate in recent years, and with a heightened focus on clean energy infrastructure, it is expected that ESG scoring will be mandatory on all commercial and residential properties in this decade. Join us for an “ESG and Future of Real Estate” panel discussion at our Commercial Real Estate Symposium where experts will explore these questions and many more to help you prepare for what’s to come. Panelists include: ▪️ Johan Tellvik, CEO, JT Consulting ▪️ Mike Miller, Founder and COO, Enriched Data ▪️ Bob Greenlee, Founder and CVO, E3SG Realty Investments, LLC

 

https://www.creconsult.net/market-trends/esg-and-future-of-real-estate-panel-discussion/

Chicago holds the top spot for Midwest rent growth

 

While the country’s most stunning apartment rent growth performances are seen in the Southeast (especially Florida) and in the Mountain/Desert region, prices are climbing at record levels almost everywhere. That includes the typically slow-and-steady performers in the Midwest.   Among the Midwest’s largest markets, Chicago holds the top spot for rent growth. Institutional Property Advisors (IPA) stats for Q1 show typical pricing for move-in leases up 17.6 percent. Leading the way on the neighborhood level, there are huge price hikes in the metro’s urban core submarkets that had recorded sizable rent cuts in 2020.   Elsewhere across the Midwest, larger metros generally post annual rent growth in the range of 10 to 14 percent. That’s the general level of increase seen in Cincinnati, Cleveland, Columbus, Detroit, Indianapolis, Kansas City, Milwaukee and St. Louis.   The region’s outlier for rent growth is Minneapolis-St. Paul, where pricing is up somewhat less at 6.6 percent. That Twin Cities apartment rent growth rate actually is the smallest seen in any of the country’s 50 largest markets. More modest rent growth is occurring despite the fact that there’s limited vacancy in the existing stock and that ongoing construction isn’t over the top.

 

https://www.creconsult.net/market-trends/chicago-holds-the-top-spot-for-midwest-rent-growth/

Lots of new apartment construction to meet the tidal wave of demand for rentals

 

One benefit from lots of rent growth: Lots of new apartment construction to meet the tidal wave of demand for rentals. The U.S. apartment market is scheduled to complete more than 414,000 market-rate units in 2022, and another 442,000 units in 2023. We haven't seen completion levels that high since the 1970s and early 1980s. Construction costs are way up – land, materials, labor – but developers are able to move forward due to big wage growth among renters. We wouldn’t see this huge surge in apartment construction if not for wage growth empowering renters to absorb the cost increases through higher rents. A typical market-rate apartment household signing a lease in Q1 2022 reported annual income of nearly $72,000, up by more than 10% year-over-year. Ultimately, rents and home prices are both surging right now primarily due to housing shortages, and we need more housing of all types to support long-term affordability and availability. The vast majority of the new supply is targeted to the top end of the market. While that’s definitely needed, there’s an even greater needed for lower-income affordable housing – but that can only happen with substantially more public funding. Cities and states concerned about housing affordability must get serious about adequately supporting affordable housing development.

 

 

https://www.creconsult.net/market-trends/lots-of-new-apartment-construction-to-meet-the-tidal-wave-of-demand-for-rentals/

Cost Segregation 101 – Reduce Federal Income Tax and Enhance Cash Flow Through Smarter Depreciation

 

eXp Commercial Partner O’Connor Tax Reduction Experts will cover: Cost Segregation 101 – Reduce Federal Income Tax and Enhance Cash Flow Through Smarter Depreciation Use:

What is Cost Segregation ● Eligible Properties ● Study Mechanics ● Enhanced Cash Flow ● Impact on Marginal Deals

---

Contact Us if you would like to attend this informative event: 

https://www.creconsult.net/market-trends/cost-segregation-101-reduce-federal-income-tax-and-enhance-cash-flow-through-smarter-depreciation/

Webcast 2022 Economic Overview and Real Estate Outlook

 

General Information Thursday, January 27, 2022 Register Now >>

Summary Join us for a lively discussion with the Honorable Henry M. Paulson, Jr. The CEOs of Marcus & Millichap, TruAmerica Multifamily and ICSC are honored to host the former CEO of Goldman Sachs and 74th Secretary of the United States Treasury. The conversation will span the economic outlook, inflation, Federal Reserve Policy, and factors impacting commercial real estate.

 

Featuring Henry M. Paulson, Jr., 74th Secretary of the United States Treasury/Former Chairman & CEO, Goldman Sachs Robert E. Hart, President & CEO, TruAmerica Multifamily Tom McGee, President & CEO, ICSC

Hosted By: Hessam Nadji, President & CEO, Marcus & Millichap

 

How Can We Help You?

Are you looking to Buy, Sell, or Finance/Refinance Multifamily Property?

contact us

https://www.creconsult.net/market-trends/webcast-2022-economic-overview-and-real-estate-outlook/

U.S. Inflation Shows More Staying Power After Hitting 7% in 2021

• CPI will remain close to 7% for a few months, Wells Fargo says
• Persistently high prices ramp up pressure on Fed, Biden to act

U.S. consumer prices are likely to extend their eye-popping gains after soaring last year by the most in nearly four decades, further burdening Americans and ramping up pressure on policymakers to act.

The consumer price index climbed 7% in 2021, the largest 12-month gain since June 1982, according to Labor Department data released Wednesday. The widely followed inflation gauge rose a faster-than-expected 0.5% over the month. Investors took a relatively sanguine view of the data, which were broadly in line with expectations.

Though many economists anticipate inflation to moderate to around 3% over the course of 2022, consumers are likely months away from a meaningful respite, especially as the omicron variant of the coronavirus worsens labor shortages and prevents goods from reaching store shelves.

If signs fail to materialize that inflation is moderating, Federal Reserve policymakers could be forced to embark on a steeper path of interest-rate hikes and balance-sheet shrinkage. It would also make it even tougher for President Joe Biden and Democrats to retain their congressional majorities in November’s midterm elections or pass their tax-and-spending package.

“The breadth of gains in recent months gives inflation inertia that will be difficult to break,” said Sarah House, senior economist at Wells Fargo & Co. “We expect the CPI to remain close to 7% the next few months.”

The report did offer some comfort to American families. Energy prices fell last month for the first time since April, and food prices -- while still rising -- moderated somewhat as the cost of meat fell. Biden said that reflected “progress” from his administration while acknowledging there’s more work to be done

Workers’ wages are simply not keeping up. Despite a slew of robust pay raises last year as businesses sought to fill a multitude of open positions, inflation-adjusted wages were down 2.4% in December from a year earlier.

Whether inflation falls as expected will depend on supply chains normalizing and energy prices leveling off. However, higher rents, robust wage growth, subsequent waves of Covid-19, and lingering supply constraints all pose upside risks to the inflation outlook.

While moderation is expected in some categories like vehicle prices and apparel, there’s “no particular reason to expect much of a cooling for the rest of the core,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said in a note.

“Sure, there will be goods categories that cool off once supply bottlenecks begin to ease later this year, but at the same time, the pressure from wages to prices is only going to ramp up,” Stanley said.

Omicron is poised to further disrupt already-fragile supply chains, due in part to quarantines and illness that have prevented many people from working. It’s also curbed demand for services like dining out. Bloomberg Economics’ daily gross domestic product tracker suggests activity was down sharply in the first week of 2022.

With omicron hitting the supply side of the economy through staffing, “inventory levels are likely to take even longer to normalize as a result, keeping upward pressure of goods prices through the year,” House said. That’s likely to be coupled with stronger services inflation, she said.

Last year, the increase in the CPI was largely due to high goods inflation. Excluding food and energy, the agency’s price index of goods surged 10.7% last year, the largest 12-month advance since 1975. Services costs climbed 3.7%.

But this year, economists expect service inflation to pick up steam as housing costs become a main driver of inflation.

Shelter costs, which were already one of the largest contributors to December’s gain, are expected to accelerate this year, offering an enduring tailwind to inflation. Other gauges of home prices and rents surged last year, but the full extent of those increases has yet to be reflected in the government’s measure.

---

Source: U.S. Inflation Shows More Staying Power After Hitting 7% in 2021

https://www.creconsult.net/market-trends/u-s-inflation-shows-more-staying-power-after-hitting-7-in-2021/