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Apartment Investment Trends to Watch in 2024

The latest Emerging Trends in Real Estate report published by Price Waterhouse Coopers in November 2023 states that they are anticipating that apartments in the US have “long-term demand drivers that should enable it to maintain steady market performance.”1

Because of this, PWC cites the industry as a standout among current real estate investment classes, where challenges have been confronted by all segments in the past year. The research lists the “the danger of an impending economic crisis, skyrocketing loan rates, and growing costs as recent challenges." 

PWC notes that "the tone in multi-family housing is much less negative than other segments" despite these general economic challenges. 

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Millennials Will Drive Demand for Rental Properties

Per government census figures, the next wave of demand will be driven by millennials (generally those born between 1980 and 2000).2

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Contributing factors include: 

All time high student debt making it more difficult to buy versus rent 

Ability to work remotely which increases housing demand in lower cost areas

Delays in major life decisions (marriage and starting a family)

Desire for a more flexible lifestyle

Higher interest costs and tighter credit standards favoring rent versus buy

There has been an increase in the supply of multi-family properties recently, with tens of thousands more apartment units added nationwide. Instead of being an underlying trend, PWC asserts that this "recent bump in supply will one day be seen as a hiccup." 

According to the research on longer term trends, to fulfill the anticipated rise in housing demand, at least 4.6 million more units must be built by 2030; else, the already severe affordability issues could worsen.3

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Sustained Demand for Both Smaller and Luxury Units

Due to growing mortgage rates and home prices, demand for luxury apartments has been stable over the past few years, and these properties are probably going to stay strong. Class A rental vacancy rates increased by 30 basis points between the end of 2022 and the middle of 2023, while Class B and Class C rentals saw a surge of 40 to 80 basis points over that same period. 

The desire for luxury housing among some segments, such millennial renters, is being supported by high obstacles to owning, and this trend is expected to continue into the upcoming year.4

Apartment Oversupply Projected to be Short-Lived

Experts predict that the market's excess supply will pass quickly since census data indicates that while city populations are still increasing, housing supply is not keeping up with demand. Most of the new supply is concentrated in a small number of major cities, which may short-term depress rents and reduce returns in the short term, but overall population trends indicate demand will remain high. 

Furthermore, multifamily home construction has probably already peaked. The trailing fourth quarter total for new construction was 351,500 after 91,400 units were delivered in Q2. Recent lower quarters indicate a decline in new building deliveries in 2024.5

Investment Planning for 2024

Despite economic and political headwinds, recent data suggests that overall demand and anticipated returns from select apartment investments remains favorable relative to other investment classes.  When making any investments, we recommend that investors should perform adequate due diligence prior to committing funds and utilize resources and inputs from knowledgeable professionals in the industry. 

Please contact FGG1031 | First Guardian Group today if you have any questions or would like more information. 

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Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $3 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student, and senior housing. Paul’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, workouts, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals. Prior to founding First Guardian Group/FGG1031, Paul was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 35 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M. Paul holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered financial representative with LightPath Capital Inc, member FINRA /SIPC. Paul is a noted speaker, author, and actively lectures on investments, sales, and management related topics. He is author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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