According to a report from the National Multifamily Housing Council, the U.S. will be 4.3 million apartments short of meeting the demand for housing by 2035. And if you believe that prediction to be particularly ominous, a glimpse of what’s ahead 10 years earlier than that will make you think twice about selling or moving from any association with multifamily housing.
While tens of thousands of new apartment units have or will come online in 2023, the financing was acquired before banks began shutting down loans and interest rates jumped. That economic reality has resulted in few new multifamily developments this year, which could result in a dearth of available property for renters in less than two years.
“I think it’s very likely there will be a shortage of apartments and houses in 2025 because the cycle got interrupted in 2022 and 2023,” John Hutchinson, co-CEO of private real estate investment firm Trez Capital, told Benzinga. “With the amount of people still moving into places like Dallas, Houston, Phoenix and Florida, it’s very possible we’ll have another shortage. It takes two years to start a project, and I think there will be a considerable shortage, especially in high-growth cities.”
Don't miss:
- 'People-First' Real Estate Fund Shares Rent With Tenants While Generating Strong Returns For Investors
- Why Warren Buffett's Investing Strategy Is More Relevant Than Ever In Today's Real Estate Market
Dallas-based Trez Capital has $10 billion in lending across the U.S. and provides equity and debt on several projects. In addition to the Dallas area, Trez has offices in Seattle, New York, Miami and Vancouver, British Columbia.
The latest report from data research firm CoStar Group found that apartment building sales are now at their lowest levels since 2009, with multifamily investment volumes dropping 74% compared to the first quarter of 2022. Those numbers represented the most significant year-over-year decline since 2009.
Hutchinson blamed the drop on the fact that money is extremely tight right now, and most banks will only offer funding for 55% of the project, putting a pretty sizeable strain on developers trying to finance the remainder at much higher rates.
“If the developer has a stable of equity investors that invest in their projects, then they’re going to have to increase the investor pool or get another investment partner,” he said. “I don’t see the (funding) gap declining for a while. Bankers tell me their hands are going to be tied until the spring of next year. It’s a great opportunity for someone who wants to put out mez (mezzanine) or private equity money.
Looking for a way to boost returns? Benzinga’s Real Estate Offering Screener has the latest private market investments with offerings available for both accredited and non-accredited investors.
Read next:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
