As we go into the new year it is a common practice to both look back at how the previous year went and to look forward to see how the coming year can be different. Here we will take a look at trends in the real estate market, focusing upon multi-family properties.
General Trends in the Real Estate Market
To gain insight into the multi-family niche it is valuable to look at data from the real estate market as a whole. Over the past 8-9 years the market has been strong overall; this is a pretty typical length for a market cycle. Experts say upward trends are likely to continue into 2018.
In 2017 there was a 2% growth rate overall and a large market in private capital; investments in real estate have been strong. Industrial real estate, particularly warehouse properties, has grown over the past several years due to the popularity of e-commerce. The increase in buying and selling online has created a high demand for data centers and storage facilities.
One factor that has influenced the real estate market is wage growth. The types of properties investors focus upon shift with these rates. Trends currently point toward improvements in the multi-family market.
What Factors Influence the Multi-Family Real Estate Market?
In order to analyze how the market might change in the coming year, there are several factors to consider. One of the most influential components is rent. If prices are too high, fewer people will be able to buy. These prices are in turn influenced by supply and demand. When there are a lot of vacancies, prices tend to drop because of the level of competition.
Predictions for 2018
Experts believe that the multi-family real estate market will be healthy in the coming year, though the types of properties have shifted towards class B and C apartments rather than class A apartments. The change in popularity might be due to economic uncertainty: class A apartments are more expensive and it is harder to claim that they are worth the money. This market is greatly influenced by two generations: millenials and baby boomers.
Although there is a preference for more affordable housing, rental rates have increased and there are more vacancies. This trend should lead to a moderation of prices in the multi-family real estate market in the coming year.
There has been a recent increase in foreign investors. This trend may also continue into 2018.
Where is There Room for Growth?
The multi-family real estate market often focuses on urban areas where apartment living is popular. Trends show that the suburbs are growing in popularity and this opens a new market opportunity for investors.
How is 2018 Shaping Up?
It seems as though 2018 should be another successful year in the real estate market. Some areas that may be worth investing in include Seattle, Austin, Salt Lake City, Raleigh/Durham, and Dallas/Fort Worth.