Apartment renters are not the only ones fighting hard for their place in the market. Multifamily investors also face fierce competition from other investors in this very competitive space. On the latest New Home Insights podcast, we interviewed Jay Parsons, Vice President at RealPage, to learn more about what is fueling the piping-hot multifamily market. Keep reading below for some of his key highlights.
Jay Parsons, VP, Head of Economics & Industry Principals, RealPage
Taking the temperature on the apartment market
- The upper income bracket is the fastest growing renter segment, fueled by rising incomes and household formation in affluent niches.
- Rising for sale housing prices are leading to longer renter retention, especially in the single-family rental market.
- There are currently 700,000+ apartment units being constructed, the highest level of activity in 40 years.
- It is highly competitive to buy a stabilized apartment project now. Investors are looking to new development for better yields.
Apartment market risks
- Some of the biggest threats Jay sees are related to policy (rent control), renter fraud, supply chain, and slowing of income growth.
- Oversupply is usually a short-term phenomenon associated with demand being met and surpassed temporarily. Diversification in the location of construction activity, especially construction in undersupplied markets, helps mitigate the risk of oversupply.
A near and distant future
- Demand is returning to city centers—but more from a return of city life than a return to offices.
- The demand increase in city centers does not come at the cost of suburban demand. Demand is more governed by life stage and preference-based decisions and urban renters want to live in cities.
- The future is always hard to predict. However, Jay expects there is still room for the apartment market to grow and thrive largely due to favorable demographics over the next 10 to 20 years.