With the first quarter of 2019 already underway, it’s time to take a look at the top investing and financing trends that might have an impact on multifamily
New construction is bringing opportunities
Multifamily development has been strong over the last few years, peaking in 2018. Around 280,000 units were delivered in 2018, according to RentCafe, and over 1 million apartment units were delivered over the last five years. However, only about a quarter of these units have been sold at this point. Developers are expected to implement exit strategies by bringing more stabilized projects to market or using permanent financing on projects, and both represent new opportunities for investors.
Value-add staying profitable and popular
Investors who are trying to stay clear of the more aggressive pricing for new properties will continue to focus on value-add opportunities, which are properties that can generate more rental revenue with some modifications, repairs and/or upgrades. Value-add strategies with shorter execution time frames –18 months or so – will be appealing to investors and lenders as rents rise across markets throughout the country and vacancies fall.
Interest rates plateauing
The Federal Reserve raised the fed funds rate a total of nine times between late 2015 and the end of 2018, but the upcoming year could see an end to the upward rate path. At a December 2018 meeting, the Federal Reserve stated it would increase rates two times in 2019, according to USA Today. With increases steady over the last few years, a rate leveling will change financing and investment outlets. Lower Treasury rates, when combined with competitive spreads,
Economic growth slowing
One reason the Federal Reserve is likely going to slow the rate increase pace is
Be sure to stay on top of investing and financing trends so you’re always making the most informed decision possible.