MULTIFAMILY TUESDAY: 3 SIGNS OF AN APARTMENT BUBBLE
|REITs and institutional buyers are still in the market for Class-A apartments, while others are looking to unload in light of falling cap rates. Vacancy is low. Rents are 4% higher nationwide than this time last year. And those at the typical first-time homebuyer age are instead staying in rentals longer. What could go wrong?|
|CohnReznick national real estate chair David Kessler, based in Bethesda, tells us there are a few indicators we're in a bubble:1) Leasing is actually slowing, from 36,000 units in Q1 to 31,000 units in Q2 and then a much bigger dip to 22,000 units in Q3, according to Reis.|
2) The fiscal cliff, high unemployment, sequestration—it all could mean a further decline in personal income (and higher ratings for CNBC... or Dancing With the Stars if you need the escape).
3) The shadow of foreclosed supply could alter the low vacancy on which basis developers have upped starts 30% over last year. Fannie and Freddie have one million foreclosed units, and private equity is buying bundles of foreclosed homes and putting it back on the market via creative solutions like rent-to-buy.David also tells us national operators are looking for operating efficiencies and focusing on resident retention to boost NOI, as it's unclear how much higher rents can go. He's among the 32 rockstar panelists we've assembled for our two-day Bisnow Multifamily Annual Conference in DC on Nov. 19 and 20.