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Making Heads Or Tails Of The U.S. Multifamily Sector

Consumers are buying confidently provided that tax cuts will improve yearly income even despite stagnant wage growth. Our multifamily clients are anticipating that U.S. rent growth should maintain its current pace, largely thanks to cities in the South and West, where supply hasn't outpaced demand. According to the Spring 2018 Yardi Matrix U. S. Multifamily Outlook report, given the state of supply and demand in most metro areas and the steady economy, rents are projected to increase by 2.9% nationwide this year, with heavy concentration in late-stage southern and western U.S. markets. As for the supply, completions are expected to maintain the same steady pace they have over the past few years. However, the biggest outside factor that is likely to impact commercial real estate markets is the threat of rising interest rates. Most millennials are still in their 20s, however, meaning that there shouldn’t be a major shift in demand for multifamily rentals in the short term. Supply And Demand Trends Development has been slowing down for the past two years, with over 300,000 completions nationwide, compared to this year’s forecast of only 290,000 completions according to the Yardi report. Yardi reports that most new developments have focused on the luxury portion of the market, while demand has been increasing for middle-income renters at a much faster rate than for those that can afford luxury units. The market is most active in southern and western regions, especially near up-and-coming tech hubs, and the economic conditions are still solid enough to support a healthy real estate market moving into next year. Those looking to invest in developments would benefit most from non-luxury projects aimed toward the outskirts of metro centers, since the demand for more affordable housing is rising and most new projects are adding to an already crowded luxury market.