Stakeholders in the multifamily market discussed their expectations for the upcoming year at the CREFC (Commercial Real Estate Finance Council) January Conference 2023, among other things. Despite the anticipated recession, most people seemed cautiously optimistic, and the outlook was not particularly gloomy. Belsky’s research into the multifamily sector supports this viewpoint.
What is the top investment option?
Multifamily continues to be the top investment option for capital still looking to invest in commercial real estate. A nationwide housing shortage and rising single-family home ownership costs are favorable factors for multifamily housing. Rental rates increased in 2022 despite a slowdown in sale activity.
Rent growth could remain modest for investors in markets with high employment and office occupancy rates. Metropolitan areas in Florida and Texas, as well as Raleigh/Durham, Charlotte, San Diego, and Salt Lake City, are examples of such markets.
A recent National Multifamily Housing Council (NMHC) Construction Survey found that 84% of respondents were still experiencing delays in 2022. “We believe there will be a modest increase in the level of new units completed in 2023, though a recession could impact this,” says Fannie Mae’s Multifamily Market Commentary for January 2023. The lack of housing will continue to drive occupancy and rental demand as long as there is not enough new construction to keep up with demand.
Positive Future Growth
The most recent Freddie Mac article claims that while the Federal Reserve (Fed) keeps raising interest rates to fight inflation, the economy is slowing down and will have an effect on all industries, including the housing market. , at least in the medium to long term. Additionally, signs point to a more immediate expansion of the multifamily sector by the end of 2023.
They anticipate a slowdown in multifamily fundamental growth through the first few months of 2023, but they also anticipate a rebound in demand for multifamily housing later in the year, provided that the labor market doesn’t enter a major recession.
The economy’s performance over the coming months will be crucial, and this will have a significant effect on the multifamily market. The multifamily sector is on track for a robust 2023 according to the current trajectory, albeit it might have a stronger second half than the first. Long-term factors that will support the multifamily market are still in place.
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