While no one has the ability to predict the future, there are ways to gain reasonable insights based on history and trends that affect the market you are analyzing.
The National Apartment Association and National Multifamily Housing Council’s (NMHC) insights report (view the report here) is an invaluable guide and resource, as we believe the multifamily apartment market is about to undergo significant changes.
These observations not only point out new trends but also provide guidance for investors who are eager to take advantage of potential opportunities in the future. In a landscape where demographics are changing and economic factors are constantly changing, it is imperative to comprehend these dynamics.
The following are some key factors we feel will drive growth in the multi-family market over the next five-plus years.
Population Growth and Demographics
“The increasing number of elderly individuals in the United States will continue to be a major factor that significantly contributes to the decline in demand in the future.”
This expected slowdown in population growth, especially among people aged 65 and up, will have a huge effect on the multifamily market. The expected annual increase of only 0.4% through 2035 shows that people’s housing needs have changed a lot, and they want multifamily units more than ever. Also, the growing Hispanic population, whose households tend to be bigger, is expected to make a big difference in future population growth, which will have an effect on the demand for multifamily housing.
Immigration’s Role in Housing
Immigration is still a major and unpredictable factor in how housing markets work.
“Net in-migration fell to 245,000 by 2021 as the pandemic made policies that were already tight even tighter.”
Even though immigration rates have recently gone down, they are still expected to significantly affect population growth by 2035. This shows how important it is to have a variety of housing options to accommodate changing demographics.
Rental Demand and Market Shifts
Demand for rentals is expected to rise significantly, especially for multifamily units.
“Demographic growth is expected to generate demand for another 3.7 million new rental properties with 5 or more units through 2035.”
This surge will start in big cities and quickly growing secondary cities. As more people work from home and more jobs become service-based, the need is even greater, especially in suburbs and smaller cities.
Impact of Homeownership Rates
The multifamily market is heavily affected by changes in the homeownership rate.
“The recent jump in interest rates seems to have dampened home buying, at least in the near term.”
Along with an aging population and a change in how different generations feel about homeownership, this trend makes people even more interested in rentals, which shows how strong the multifamily market is.
The Role of Single-Family Rentals and Affordability Concerns
The rental market for single-family homes is growing, but “most SFR is still owned by small investors.”
This sector offers housing options for older workers and is usually found in good school districts. However, the multifamily market has trouble with affordability.
“Affordability remains a very important housing issue, especially for renters,” which means that new ways must be found to help the “Missing Middle” in housing.
To sum up, the market for multifamily apartments is going through a time of growth and change. As population changes and new trends appear, investors are given one-of-a-kind chances. Investors can take advantage of these growing opportunities in the multifamily apartment market by staying informed and open to change.