Recent rental and housing statistics compiled in 2010 clearly show that multi-family and rental investing is the place to invest capital. Information from the Department of Commerce, the University of Utah, the Urban Land Institute and the Census Bureau provides compelling data showing that demand for multi-family homes in urban centers will exceed supply and demand for multi-families overall will be at record highs during the next decade. Investors, developers and professionals in these markets have a lot to be excited about. 2010 continues to be full of interesting news for those of us who are dedicated to the rental business and especially the multifamily business. Here is data to get your attention:
- 50% of the new homes formed over the next decade will be multi-family. Please note this is multi-family and not just for rent.
- By the end of the decade, home ownership will be less than 62% down from 69% in 2005.
- 77% of Gen Y / Echo boomers prefer city life.
- The rental demand is expected to increase significantly in 2010.
- The United States is on track to reach 438 million in 2050 from 310 million today.
- Housing density has moved down since 1940, but has recently increased. This trend going forward is unclear, but square footage per resident is expected to continue to trend downward as the urban trend gains momentum.
- Demand is expected to far exceed supply in the main urban centers of the market.
- Generation Y households will rent much longer than their parents before them because housing affordability will come later in their careers and because they are likely to choose to have children later in life.
- Aging baby boomers will add to the rental demand due to loss of wealth and the normal rise in rents in older households.
- Babyboomers living in McMansions will have a difficult time selling these assets, especially at the end of the decade.
- The big winners are expected to be the largest metropolitan areas, including New York City; Washington DC; Atlanta; Miami; Houston, San Francisco; etc.
The sources for this information are the University of Utah, the Urban Land Institute, the Department of Commerce, and the Census Bureau. All of this points to some important identifiable opportunities for investors. Developers producing new Class A properties in major high-growth markets will prosper. Investors who buy and operate multi-family projects in urban centers will be the beneficiaries of exploding demand and strong appreciation in value. McMansion properties are high risk unless converted to high density housing. The opportunity for single family development will remain weak for the rest of the decade and possibly beyond.
