2019 Apartment Investor Market Outlook
Updated: May 4, 2019
There is a lot of talk amongst investors about the market outlook, is a correction eminent and what does that mean to apartment investors in 2019? There’s a lot to consider when determining the investment outlook. Although a correction is likely at some point, experts, forecasters and economists are projecting that the 2019 apartment market still looks attractive.
As shifts in the market are cyclical, conservative underwriting, assumptions, and expectations are paramount when purchasing properties and protecting against uncertainty.
These are the main reasons experts continue to view apartment investments as healthy opportunities in 2019. (Note: These are observations, forecasts or trends and not all things in the market are predictable.)
1) Housing Shortage–The U.S. continues to have more households, and less available housing units. Current estimates are that the U.S. needs 2.7M more units just to catch up with household growth. New construction is also down 5.6% year over year.
2) Increased Rental Demand – Younger workers are finding higher housing prices a deterrent to home ownership, they also want the flexibility to move and not be tied down. Baby boomers are retiring, downsizing and looking for lock and leave, high amenity, low hassle apartments.
3) Affordability Gap – The average gap between the cost of home payments and apartment rent is $339, favoring renting in many markets. This makes these areas, where it is more attractive to rent versus buy, good markets to purchase apartment buildings because of increased demand.
4) Multi Family Asset Pricing – Although, we are seeing A class, new construction prices pulling back in select areas, class B/C value-add assets are still in high demand.
5) Cap Rates And Yield Spreads - are expected to remain essentially flat. Increasing cap rates reduce commercial property values, however the fed is signaling a slower pace of interest hikes in 2019, which puts to rest the fear of even higher capital rates.
When considering what markets will be good for multifamily investing in 2019, experts and forecasters categorize markets in these 3 buckets.
1. Markets with strong rent growth and landlord friendly
Florida (Orlando, Jacksonville and Tampa),
Arizona (Phoenix, Tucson),
2. Markets benefiting from the Amazon effect. The amazon effect being when other large company choose to relocate to a market because they were on amazons “runner up” list.
Austin (Apple in Dec announced 5K-10K jobs added and a $1B expansion)
3. Markets with Top Employment Growth are attractive to apartment investors.
Texas (Dallas, Houston),
These are all strong indicators that the outlook for apartment investors is strong in 2019. In addition, we at New Heights Investment Group, only participate in value-add real estate opportunities with conservative underwriting. To learn more about our investments visit https://www.newheightsinvestmentgroup.com/what-we-do.