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National Multi Housing Council
US House Prices
The US apartment (AKA multi-family home) sector continues to bring increasing profits to investors' pockets and bank balances. According to the latest reports rents and occupancy figures continue to increase strongly in the sector, including the 2.2% growth in rents year on year in Q1 recorded by property research firm Reis. The firm also recorded a 130 basis points decrease in vacancies, down to just 4.9%. This is compared to vacancy rates of 11% and 17% according to Reis in the retail and office sectors, where owners continue to face weaker rent growth and more empty space respectively.
The continued growth is being put down to (what it has been put down to since the boom began), unprecedented demand fuelled by the constrained mortgage market and repossessions, along with weak construction figures. Just 7,342 apartments were completed in the first quarter, the least since 2009 according to Reis, as developers are still cautious and continue to have trouble raising finance. The National Multi Housing Council said recently that while debt financing has become more available for acquisition and development in big cities, that lending is still constrained in smaller markets.
"I'm optimistic about the multifamily sector, certainly for the next two years," said Kevin Thorpe, chief economist at commercial property brokerage Cassidy Turley. "We've entered a period of sustained rent growth."
A recent Cassidy Turley report said that in 2011 apartment rents rose in all 50 markets that it surveys.
However, experts wonder how long the growth can continue, with the economic recovery tepid at best and rising competition from the single-family home sector, with the Federal government encouraging investors to buy REO in bulk and rent it out. However, market bulls continue to point to weak supply vs swelling demand, especially from the "echo" boom generation — people born in 1986 or later who are entering their prime rental years — and more than 3 million former home-owners displaced by foreclosures or short sales.
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