After the global financial crash, it seemed like the housing market would take years to work through its inventory of unwanted single-family houses. Now, however, there are far fewer homes available for sale, and many developers are turning to new construction to create new rental housing.
Banks are eager to lend money to apartment developers to build new apartments. “We still get a number of bids for every deal—four to six or more,” says Michael Riccio, co-head of national production for CBRE Capital Markets.
With prices so high for apartment properties, any loan based on today’s appraised values is going to look very large compared to historic prices. But multifamily CMBS loans are especially troublesome, according to Moody's Investors Service.
The market for apartment properties is likely to keep expanding. That’s despite the fact that the business of investing in apartments has already been in expansion for six years, since property prices hit their low point in 2009.
Many apartment experts think the number of vacant apartments will rise this year, despite strong rent growth this spring. But in the long term, a growing number of researchers expect the demand for rental apartments to keeping growing for more than a decade.
Large investors continue to buy single-family homes, though not as many as they bought just two years ago when home prices were lower and many of these investors were building their portfolios to reach a critical mass that they could operate and finance effectively.
The good news keeps coming for apartments. New resident rents rose 5.2 percent over the 12 months that ended in the second quarter. That’s the biggest rent hike since 1999-2000, according to the latest data from MPF Research, based in Carrollton, Texas.
The demand for student housing is stronger than the supply on average across the country—and the strongest segment of the student housing market, privately-owned student housing properties were already full as of May for the academic year that will begin this fall.
Developers have been very slow to restart construction of new condominiums across the United States since the condo crash. But in a few coastal markets like New York City and San Francisco, new condominiums are selling quickly and developers are building in bulk. The high cost of developable land is encouraging condo development in some prime downtown locations.