• Rachel A. Simon

Multifamily Real Estate Investment Forecast For 2021

The revitalized U.S. economy has many investors wondering which real estate sector will yield the best short- and long-term growth. With big-box retail giants shuttering brick-and-mortar operations and Millennials reshaping business and residential trends, it’s time to take a long hard look at multifamily properties.

While house-flipping shows and bids for Amazon headquarters garner big headlines, making money doesn’t have to be sexy. In fact, slow and steady often wins the race when it comes to building a financial portfolio. That being said, multifamily real estate has been quietly making steady progress that may pique your interest.

Multifamily Rents Trending Positively

It’s no secret that the single-family home inventory shortage has been a boon for multifamily investors. The lack of inventory and rising prices are keeping many renters in place.

Although the rental market was impacted by COVID, in March 2021, the national rent index was up 1.1 percent month-over-month, completely wiping out the COVID dip and indicators signal that the rent growth will continue in the following months. On a quarter-over-quarter basis, the U.S. average rent appreciated by 0.8 percent.

Multifamily Vacancies By The Numbers

Much of the naysaying about the housing market, in general, has been based on comparing rising real estate prices and comparing them to increases right before the housing bubble burst. That type of analysis often fails to account for long-term steady measures. In the case of the sub-prime mortgage crisis, there were other forces at work.

The data on the multifamily vacancy rates shows marked improvement. If we look back to the 2008 crisis, multifamily vacancies increased to 10 percent or higher and remained at that level for every quarter except one through Sept. 2010. But those numbers were not particularly positive as far back as the first quarter of 2006 when the vacancy rate was 9.5 percent.

Since 2011, there has been a sustained improvement that dipped below 7 percent in the second quarter of 2018 for the second time in under one year. At the end of Q4 2020, that number was 6.5%. The numbers do not lie. The multifamily vacancy rate appears to be the tortoise that is winning the race over the last decade.

Those positively trending numbers may be a sound reason to anticipate further gains barring a significant disruption in the real estate market.

Multifamily Investment Looks Positive For 2021

Real estate insiders are expecting growth in multifamily housing construction during 2021. Some experts expect major projects to be completed to fill the supply need. However, once vacancy rates are sated construction outfits may shift back to the commercial and industrial sector that are taking advantage of the growth economy.

In other words, the multifamily landscape appears ripe for investment in 2021.


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