Multifamily demand will moderate its growth through 2035, according to a soon-to-be-released study from the National Multifamily Housing Council. The new study predicts that demand will rise 25% to 30% below previous forecasts. The reduced projection is due to the likelihood of a major recession, flat population growth and low immigration levels. Real estate finance professor Norm Miller presented this forecast at the recent MHNC Research Forum in Denver.
According to Professor Miller, inflation and economic contraction are near-term risks for the multifamily market. He also projects a major recession in the US by 2029 or 2030, due to the growth in entitlements and the federal deficit. Migration to cities such as Dallas, Houston, Charleston, Austin, and Phoenix will continue, but at the expense of Midwestern cities. This will fuel the continued apartment demand in these markets.
Although the population growth will be flat, the composition of the rental population will shift according to Professor Miller. He predicts growth in the renter population will be driven by older white people and both older and younger Hispanics.
In the near-term, the multifamily market will slow from its pandemic-related highs. Yardi Matrix predicts that household growth and absorption are likely to moderate to “more normal levels” for 2022, BTIG Research also predicts the pace of new leases will moderate in 2022, particularly in the Sunbelt region. The BTIG research also predicts increasing turnover due to affordability issues. “The reported rent-to-income ratios for the REITs have remained stable as we have moved into the post-Covid period, said James Sullivan and Ami Probandt of BTIG. “However, the REITs only collect income data from new tenants.”