Multifamily sector well-positioned for long-term health

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The multifamily housing sector is well-positioned to survive the current economic downturn, and the long-term outlook for the industry is healthy, according to economists speaking at the National Association of Home Builders' semiannual Construction Forecast Conference. |ret||ret||tab|

"Multifamily starts have been cruising at just the right altitude, staying close to 300,000 units annually for the past four years," said Jack Goodman, a real estate economist and principal of Hartrey Advisors of Arlington, Va., in an NAHB release. "That's a very sustainable level for multifamily starts rents have shown healthy increases, vacancy rates have remained low and those two facts have made apartments the darling of the investment community," he said. |ret||ret||tab|

Goodman also was optimistic about the industry's long-term prospects, despite the current weakness in the economy. |ret||ret||tab|

"Consumer demand is likely to maintain moderate growth, and the supply of financing is ample," he said, noting that the participation of Fannie Mae and Freddie Mac in the secondary mortgage market for multifamily provides added safety for this sector of the market. |ret||ret||tab|

With the average age of the nation's apartment buildings now close to 35 years, rehabilitation opportunities should also be plentiful in the future, Goodman said, particularly because much of the aging stock is located in city centers. |ret||ret||tab|

"Public policy in some jurisdictions is becoming much more friendly toward urban development of multifamily housing and the clamor for shorter commutes and smarter growth is accelerating," Goodman said. |ret||ret||tab|

"The suburban apartment product in a cornfield is going away," agreed Kimberly Fiala, senior vice president of market research for JPI of Irvine, Texas. She said JPI, one of the nation's largest luxury apartment developers and a member of NAHB's Multifamily Executive Leadership Board, has primarily been looking at infill sites for both new development and rehabilitation opportunities. |ret||ret||tab|

Fiala also noted that the characteristics of both apartments and the people who rent them have changed over the past decade. |ret||ret||tab|

"Our typical apartment resident is 25 to 35 years old, single, and earning an average of $60,000 per year," she said. "They are looking for apartments that are close to where they work or go to school and which offer spacious floor plans and plenty of amenities." Apartments are getting bigger, statistics show, with the average square footage up 8 percent during the 1990s. |ret||ret||tab|

When asked whether apartment owners and developers should be concerned that multifamily starts have yet to return to the highs seen in the mid-1980s, when production averaged 650,000 units annually, Goodman said no. |ret||ret||tab|

"Right now, there are very few markets in the country that are overbuilt if we do get back to the production levels of the 80s, that's when we should start to worry."|ret||ret||tab|

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