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The Outlook for Multi-Family Real Estate in 2015

Multi-Family Real Estate Crowdfunding

The recent Commercial Real Estate Finance/Multifamily Housing Convention & Expo hosted by the Mortgage Bankers Association discussed key trends in the multifamily sector that could impact industry growth in 2015.  The consensus seems to be that rising demand for rental housing will likely continue to boost development and in-market real estate investment in the market compared to previous years. 

Apartment Vacancy Rates at Record Lows

Jeffery Hayward, executive vice president and head of multifamily at Fannie Mae, noted at the housing convention that vacancy rates for properties in the multifamily market are at record lows, Commercial Property Executive reported. Fannie Mae said the rise in demand for rental properties is leading to all-time lows in vacancy rates.

In the top 79 markets monitored by data firm Reis, apartment vacancy rates stayed at 4.2 percent in the fourth quarter from the third quarter 2014, National Real Estate Investor reported. This is a slightly elevated level from the fourth quarter of 2013's 4.1 percent. 

Brad Doremus, an associate in the research and economics department at Reis, said overall demand for apartments was solid in 2014, pointing out that the market absorbed a net of nearly 161,000 units, up from 160,000 units in 2013. This demand could continue to gain momentum in 2015. 

Multifamily Lending Activity on the Rise

Commercial and multifamily lending spiked 11 percent in the final quarter of 2014 compared to the previous quarter, according to the MBA. The MBA report found multifamily loans were a big part in driving the increase in commercial/multifamily lending volumes with multifamily property lending jumping 42 percent quarter to quarter in the fourth quarter.

"The fourth quarter set record quarterly origination volumes for life insurance companies, for Fannie Mae and Freddie Mac and for multifamily lending," MBA said. "With low interest rates, rising property values and improving property fundamentals - and in spite of a significant drop in the volume of loans maturing during the year - the preliminary numbers show every major investor group increased commercial and multifamily lending in 2014."

Multifamily Builders Optimistic about Growth

A panel at the National Association of Home Builders International Builders' Show had a positive outlook for the multifamily housing market heading into 2015, World Property Journal reported. The association predicts the number of multifamily units in development in 2015 will grow to 358,000, up 2% from 2014’s figures.

The increase in construction activity in the multifamily sector reflects a higher market demand for these properties from both consumers and real estate investors. The recent recession and resulting stricter lending standards has resulted in a relatively strong rental market, with many persons seemingly less keen on home ownership.  "The multifamily industry is strong and producing more units than in previous cycles," said David Crowe, chief economist of NAHB, according to World Property Journal. "The industry has shown dramatic increases in construction since the recession, but the level of increase will moderate as we approach equilibrium."

Although the construction costs of building multifamily units are rising, builders are still optimistic that strong demand can offset the higher expenses.  Real estate investors are anticipating much of the growth to come from the “millennial” demographic, consumers age 24-34.  These persons will be at their peak renting age, likely leading to more growth in the multifamily market if new construction doesn’t overwhelm demand.   

Realty Mogul offers equity securities through North Capital Private Securities Corp., member FINRA/SIPC

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