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At year-end 2017, we took a look at the Los Angeles multifamily market. We noted then that Los Angeles stood as one of the stronger markets nationally, with low vacancy and high investment volume. As we look at results from the first quarter of 2018, market fundamentals remain strong, although signs of weakness continue to be observed.

Complementing the recent review of household composition and living arrangements, a closer look at householder age indicates the steady graying of small asset apartment demand.

A closer examination of household composition, including single renters and families, as well as living arrangements reveals distinct patterns across rental asset classes.

While rental housing costs remain high, the accelerated improvements in the U.S. economy have resulted in incomes that are rising slightly faster than rents.

While renters are gaining economic confidence, the issue of affordability still weighs heavily when considering a path to homeownership. According to Freddie Mac’s recent Profile of Today’s Renter report, a staggering 67% of renters consider renting as a more affordable alternative than homeownership.

As primary markets get increasingly expensive for housing, young adults at the beginning of their careers are moving into regional hubs. This movement is providing new growth opportunities for small asset investments.

One way to look at the drivers for Millennial demand across US metros is to consider their concentration. Their concentration is shown here as an index of the Millennial share in small properties (5 to 49 units) to their share in the wider metro population.

Here’s a quick look at the small balance multifamily finance and investment benchmarks for Q4 2017.

Los Angeles remained one of the more sought-after multifamily markets in the U.S. during 2017, as rent growth and investment volume ranked near the top nationally. The vacancy rate also remained low, despite an influx of new supply, and demand for additional housing remains high. The local economy has recovered from the recession, although high housing costs and restricted in-migration may slow expansion.

The Dallas multifamily market posted strong results in 2017 as rent growth continued and investment activity was high. Vacancy — driven by an influx of new supply — increased,  though levels remained well below previous highs.