The National Multifamily Housing Council conference was held this month in Florida. BAM scouted a recap in the National Real Estate Investor (NREI) online to see what the lessons were from this annual industry gathering. Overall, according to NREI, the mood was positive – yet somewhat offset by the reality of factors like interest rate hikes and a possible eventual economic slip. The NMHC conference presented important industry information that we wanted to share, like:
According to NREI data, the conference noted interest rates might soon be on the rise. It’s no secret that the Fed wants to raise rates and we’ve written about it before. The NMHC discussed there being as many as four interest rate increases this year, all depending on the strength of the overall economy. They also noted that we should anticipate a switch from negative to positive rates in real estate, while we’ve been in negative rates since the recession. Still speaking of the economy, the conference warned that it may hit a slump in the next few years. Yet, they also believe the multifamily industry could handle it on the demand side thanks to homeowner numbers changing.
NREI said that the NMHC conference discussed areas for potential growth and one market showing a lot of promise is working-class areas. Markets with a higher rate of blue-collar workers showed rent growth; however, these areas also had construction present. While considering deal making of any kind, being selective and cautious is important according to the NREI article. In the current mature economy, it’s vital to take care on deals and reduce error – but the benefits mean better deals with higher quality. Being selective and deliberate pays off in this climate.
The conference also cited the gap between class-A and class-B apartments. The source cited by NREI notes that this is mainly due to the style of inventory built. Apartments went from garden-style in the early 2000s to mid- and high-rise today. The gap also changed: from $225 in the 2000s to $570 today. Some cities experience a much larger rent gap – and they note that Boston has the largest with over $1100. According to NREI, the conference went on to discuss overall construction delivery. Although some construction is slowing, some might be over-delivering. Certain markets are expected to possibly produce a glut of inventory which would affect rent growth. Areas like Houston, Seattle, Denver, and Boston are just some on the list to watch.
The conference was realistic about what may affect our industry in the near future and although there are potential challenges, there are also upsides present. You may have to work harder to find a good investment but you’ll have a better quality deal once you do. The economy may hit a rough patch but with homeowner numbers shifting, the industry is likely to ride it out the demand side. Overall, balanced optimism is a solid post-conference view of the multifamily industry.