For those in the industry wondering when the tide is going to shift on the apartment industry’s post-recession remarkable growth, the answer looks to be not any time soon thanks to a continuation of a moderate growth economy, relatively low inflation and some improvement in household formations, according to several economists at the 2015 NMHC Board of Directors and Advisory Committee Meeting.
“The next 12 months are going to look a lot like the last 12 months,” said Mark Obrinsky, senior vice president of research and chief economist, “and remember, we’re talking the economy, not politics.”
(Obrinsky’s full presentation is available here.)
Kim Betancourt, director of economics and multifamily market research with Fannie Mae, said the demographics are in the multifamily industry’s favor over the long term, especially given the size of the generation currently only in high school. For now, Millennials are renting-and preferring renting apartments over single-family rentals. While some of those preferences may change with time, it won’t spell disaster for the apartment industry even if Millennials begin to shift more meaningfully into homeownership, she said.
“No matter what they [Millenials] do, there’s actually plenty of business for everyone-because there are so many of them,” Betancourt said.
(Click for Betancourt’s full presentation.)
Obrinsky echoed that sentiment, saying he was more or less agnostic about where homeownership rates are headed. “I always come back to the fact that we live in a country with increasing population. We add as many people as live in Illinois every five years. There’s plenty of room for an increase in owners and renters. We need an increase of supply of both types.”
However, Betancourt said she did have some concerns about how tight the multifamily market had gotten. Particularly concerning is the fact that the estimated national multifamily vacancy rates are at their troughs-“too low” for her comfort-and the effect that’s having on rents. “Look at the rent growth-yikes-and incomes haven’t moved. For many years now, rent growth has outpaced wage growth,” she said.
Obrinsky agreed that that stagnant income growth among renters is a growing challenge for the multifamily industry. “The median income of renters has gone nowhere,” Obrinsky said. “So, when we talk about widening affordability problems for both owners and renters, this is why: Their incomes have not really kept pace. It’s a tough problem to deal with, but it’s a fundamental problem.”