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Multifamily Housing Predictions for 2011

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By Amy Belasen

As we enter a new year, we’re happy to see that the Multifamily Housing industry is on the upswing.

The past two quarters have consistently shown signs of improvement with reductions in vacancy rates and increases in rents paid. (Neglecting your credit score isn't vogue anymore - people seem more inclined to pay on time). Multigenerational families forced to shack up during the recession are now able move into their own space as a result of economic renewal in cities across America. More jobs means more dollars circulating, more renters, more contracts and of course, more investors.

In December, the National Real Estate Investor reported that in the next few years, the strongest demand for apartment units will continue to stem from echo-boomers, a group of 70 million 20-34 year olds projected to grow by another 3.2 million in the next 2 years. While investor interest has piqued, developers were forced to scale back on construction in the past year for obvious reasons. The stage is set for new construction in the upcoming year, especially in supply-limited areas.

Investor interest has gained major momentum in the past year and the Jones Lang LaSalle 2011 Multifamily Investment Survey reveals even more interest in 2010. “93 percent of respondents–multifamily owners, investors and developers–predict their investment allocation into multifamily will increase in the coming year, up slightly from the 90 percent who answered similarly last year.” The majority believe that apartment rates will rise by 5% in 2011.

Development, however, is still a sticky subject. Survey respondents are divided. Multi Housing News Online reports that while 37% are optimistic and believe that development has already recovered, another 22% believe it could take the next 18 months to restore liquidity and development projects. 30% of those surveyed fall somewhere in between -- predicting slower growth in the area of development, occurring gradually over the next 6 to 12 months.

These predictions are based on supply and demand. In the past year, the shift from single-family homes to apartment rentals made headlines. In the next year, that shift will continue to gain momentum. Burned by the economic decline of the past few years, former homeowners see apartment rentals as a better choice than investing in a home.  Recognizing this shift, investors and commercial real estate brokers are expected to capitalize on it in 2011.

The multifamily apartment housing sector will likely outperform other real estate properties this year. Job growth and the sheer number of echo-generationals moving out on their own equate to growth and revenue.

Here’s another prediction for 2011: flash websites for apartment communities are out, and mobile websites are in. More to come on that topic, so stay tuned.

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