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Apartments Are Most Popular Investments
In the world of investment real estate, multifamily housing is still the most popular type of real estate investment. Currently, it continues to account for nearly one third of real estate investment transactions. This has been the most popular type of investment because of rising rental rates.
Investments in these properties are based on economic fundamentals. Lenders and investors closely scrutinize the financing of multifamily housing projects to be sure that the cash flows will cover expenses.
The recession and the poor housing market has changed markets for new homes. But lower interest rates and lower prices have increased demand for new home purchases in some key areas.
There have been some changes in the types of households and tenants who will be the users of apartments. Some were owners who lost a home through foreclosure.
The New Tenants
The recession took some previous homeowners out of their homes and into apartments. The traditional type of family group buying or renting apartments and houses has been the married couple with children. These will certainly remain as a large part of the market for apartment units. Recently however, there have been more single-person tenants and non-traditional families than in any previous time. The average household size has shrunk to 1.5 persons during the past ten years. In the next decade, the figure may be smaller.
Older citizens in the age group of 65 to 75 are also in the apartment market. While about 70% of this group own their homes, the remainder need rental housing. There also are a large number of single-person households in this age group.
With the increased prices and values of single-family homes, there should be an increase in the demand for apartment units. These changes should affect the plans of developers for the sizes of units and their locations.
An Urban Location
In previous decades, a high percentage of the apartments that were built were in the suburbs. The new tenants, non-traditional families and single person households, are choosing more urban locations. The choices for developers may be high-rise structures back closer to the urban areas, on the periphery of downtown rather than in the suburbs