Employment is a major factor to the growth of all metropolitan areas. Among the 49 metropolitan areas with a Census 2000 population of 1 million or more, the highest unemployment rates in February were registered in Riverside-San Bernardino-Ontario, Calif., 12.5 percent, and Las Vegas-Paradise, Nev., 12.2 percent. Five additional large areas posted rates of 10.0 percent or more. The lowest jobless rates among the large areas were recorded in Oklahoma City, Okla., and Washington-Arlington-
According to Marcus & Millichap, apartment operations continue to build momentum as favorable demographics blend with an improving employment market. Barriers to homeownership and continued housing market instability also favor apartment performance over the coming year. Apartment construction has begun to ramp-up however, and although new supply will fall short of forecast demand gains in 2012, the deepening development pipeline could begin to slow performance gains
Dollars will continue to flow into multifamily housing, eclipsing other property types, and aggressive developers will overbuild eventually—just not in 2012 or 2013, when new supply just begins to temper renter demand. Investors must be satisfied with modest returns. Cap rates could decline further in. Midsize apartments are the safest real estate investment bet, promising to sustain decent returns even if the economy fails to reignite. That’s worth a great deal in uncertain times.
ABOUT THE AUTHOR: Eugene E. Vollucci, is a real estate advisor and Director of The Center for Real Estate Studies, a real estate research organization in Palos Verdes Estates, California and co-author of "How to Buy and Sell Apartment Buildings" Second Edition (John Wiley & Sons, 2004). To purchase a subscription to Market Cycles and to learn more about the Center for Real Estate Studies, please visit our web site at calstatecompanies.com