Research

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.

With a lower share of inventory located in flood-prone areas, small buildings are more conservative in their risk profile and offer value for investment across the apartment market. Resiliency and Risk Landscape for Small Buildings Recent reports point to a counter-intuitive trend of how home prices and apartment rents are growing faster in flood prone areas. This trend is explained by the premium associated with scenic locations such as beach fronts and waterways, since they are also the most-prone to flooding. This varies across metro areas and asset class. As shown below, based on data obtained from the American Housing Survey (AHS) 2015, around 8% of all small apartment building units in the United States were located within areas assessed with a high risk of flooding. In large buildings the share was slightly larger at 10%. The risk assessment for apartment buildings and their units varies greatly across metro areas. The data indicates that small buildings displayed a tighter spread around the national average compared to large buildings. An indication of the preference for scenic, albeit riskier, locations characterize the Read the full article…

Aided by growth in agency lending and refinancing activity, the volume of new multifamily loans with balances between $1 million and $5 million reached $49.8 billion during 2017