One of the questions that I get all the time is: Is this the top of the multifamily market? Have I missed the boat? There are still excellent opportunities ahead. Let’s take a look forward to what the apartment investment market holds for 2016.

So, what will 2016 look like for the apartment investment market?

A Quick Look Back at 2015
2015 was quite a ride for the multifamily housing market. The extremely low vacancy rates and increases in rent growth made it a record-setting year. Home ownership was the lowest it’s been since 1964. Although there will be some changes, the fundamentals that support the market will remain in place.

Strong job growth will continue, according to MPF Research, and these lower home ownership rates may be the new normal. Despite an uptick in household formation, as millennials move out of mom and dad’s house, home ownership isn’t increasing. “Gen M” aren’t buying homes; they’re renting apartments: by lifestyle choice, not necessity.

Despite 300,000 units scheduled to come online in 2016, demand still outpaces construction, especially in the workforce housing space, where there is a marked shortage. Most construction is at the “A” level, the uppermost part of the market. There are still opportunities in the B and C markets, which have been our sweet spot for passive investment opportunities as well as where our consulting clients are getting deals done, closing over $26,000,000 worth of apartment buildings in 2015 alone.

What’s In Store for 2016
It’s interesting to note that multifamily housing construction is slated to start out slower than anticipated in 2016, which will further bolster rental increases and help keep vacancy rates lower.

Everyone was wringing their hands over the proposed federal interest rate hike. I don’t have a crystal ball, and I tend to listen to those who are far smarter than I am. The quarter percent increase will be immaterial for multifamily loans as we move into 2016. That being said, these rates will not last forever, and NOW is the time to get attractive long-term debt.

It has never been more important to buy the right deal at the right price. Overpaying for a deal will be the downfall of many an inexperienced operator, who will put too much emphasis on rent growth and will fail with any fluctuations that may occur in the market. Our clients are finding that “the deal that got away” isn’t making it to the closing table, creating an opportunity for an educated and prepared investor.

Overall, the forecast for multifamily continues to remain strong with the renter pool growing from both the older and the younger populations. Don’t wait any longer to get in the game. Although the apartment market will be stable for some time to come, the conditions of favorable debt and superior leverage will not last forever.

I thank you for your continued support – Let’s make it happen in 2016.

To a prosperous New Year!

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