A panel of economists at the MFE Conference held in Las Vegas last week reinforced the sentiment of the entire event: Multifamily is a good place to be with a future that is brighter than expected.
"We're in the throes of a recovery," declared Ryan Severino, an economist with Reis, during a session with other economists David Crowe, the chief economist at the National Association of Home Builders; Jamie Woodwell, vice president of commercial real estate at the Mortgage Bankers Association; and Hessam Nadji, director of research services at Marcus & Millichap.
Woodwell mapped out the past three years as a "detour through disequilibrium" and called 2008 the "year of the stress test," which was followed by 2009 ("drivers wanted") and now 2010 when hopefully a more balanced housing policy has been achieved.
Crowe agreed, though he was more cautious than the other economists, predicting a slow progression forward. "2012 will be the better year," he said, adding that multifamily production will need to fall between 300,000 and 400,000 units per year to stabilize demand.
Nadji, a longtime presenter at the conference, meanwhile pointed to the increase in occupancy levels as signs of improvement. While the demand was, unfortunately, not driven by jobs, it does point to increased confidence among renters who were previously opting to share units or live at home. "Studios and one-bedrooms are driving absorption, not jobs. It's the people who moved in with their parents or roommates to save money who are now coming out and renting apartments," he said.
Looking at the transactional market, Nadji urged investors to use caution when choosing where to allocate dollars. "We're right now seeing the highest spread (at 470 basis points) between the 10-year Treasury and apartment cap rates. Market selectiveness will rule in the recovery," he said.