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Los Angeles, CA. The Center for Real Estate Studies (CRES) has just released their 3rd qtr 2012 publication "Market Cycles". It gives a forward look to more than 150 apartment markets with “buy and sell” recommendations.
“Currently the number of multifamily markets in the ‘Sell Phase” is twenty-eight, according to Eugene E. Vollucci, Director of CRES. The number of multi-family markets in the "Buy Phase” is twenty-two. Mr. Vollucci said, “ Apartment market fundamentals and rents are strong and little supply has come on line during the recession. It looking like a good time to start investing in mid size apartment buildings
According to the Urban Land Institute, as the multifamily sector attracts more and more capital, this has driven cap rates lower and asset prices higher. Mid size apartment prices are driven by—job growth, high barriers to entry, and proximity to mass transit. Namely, the characteristics exhibited by core, gateway cities. However, with only so many of these assets available within this context, some sought alternatives such as value-add repositioning, new development, adaptive re-use of other building types, and joint venture partnerships with landholders from broken single family or condo deals.
The apartment sector’s strength continues unabated,” said NMHC Chief Economist Mark Obrinsky. “Even as new construction ramps up, higher demand for apartment residences still outstrips new supply with no letup in sight. Despite the need for new apartments, acquisition and construction finance remains constrained in all but the best properties in the top markets.”
The disappointing and markedly slower pace of employment gains had little impact on the steady demand for apartments in the second quarter according to Marcus & Millichap. Conditions remain favorably aligned for sustainable strong apartment performance. Robust demographic trends, including higher levels of immigration, the surge in echo boomers forming their own households, a further shift away from homeownership, and the growing diversity in household composition support continued demand for rental housing.
Apartment markets improved across all areas for the seventh quarter in a row, but the pace of improvement moderated according to the National Multi Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions. The survey’s indexes measuring Market Tightness (56), Sales Volume (51), Equity Financing (56) and Debt Financing (65) all measured at 50 or higher, indicating growth from the previous quarter.
ABOUT THE AUTHOR: Eugene E. Vollucci, is the Director of The Center for Real Estate Studies, a real estate research association and author of "How to Buy and Sell Apartment Buildings" 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