Posted: 07 Oct 2014 08:49 AM PDT
The number of multi-family rental housing complexes being built around the nation keeps on growing month after month. The implications for the property management business are somewhat ambiguous.
No doubt there’s been a steady decline in the number of homeowners since the financial crisis of 2008. This has translated to a substantial increase of renters who are likely to remain renters for a long time.
That’s been good news for property managers and their owner-clients. For the past 4 years vacancy rates have declined while the inventory of rental units built has reached record levels.
For example in 2012 nearly 6% of the 535,000 single-family homes built were used for rental housing, according to info made available by the National Association of Homebuilders. By comparison the 32-year average ending at the housing market peak in 2006 was about 2% of houses built were rentals.
The NAHB also keeps track of the number of multi-family units that are built quarterly as rentals. The Multifamily Production Index (MPI), a leading indicator for the multifamily market posted a gain of five points to a reading of 58 for the second quarter of 2014.
This is the 10th straight quarter with a reading of 50 or above. The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100.
The MPI also provides a composite measure of three key elements of the multifamily housing market: construction of market-rate rental units, low-rent units and “for-sale” units, or condominiums.
A number over 50 indicates that more respondents report conditions are improving. In the second quarter the “…MPI component tracking builder and developer perceptions of market-rate rental properties had a significant increase of nine points to 68”.
This is the highest reading since the third quarter of 2012; low-rent units increased four points to 52. Units for sale rose two points to 56, underperforming the expansion of rental units built.
“We have seen steady growth for the apartment market since 2011,” said W. Dean Henry, chairman of NAHB’s Multifamily Leadership Board and CEO of Legacy Partners Residential in Foster City, Calif. “There will continue to be strong demand for the foreseeable future, but the availability of construction labor is still proving to be a challenge.”
The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, was essentially unchanged, increasing one point to 38. With the MVI, lower numbers indicate fewer vacancies.
“The MVI, the vacancy index, has been holding steady at a healthy level of 37 to 38 since late 2013,” said NAHB Chief Economist David Crowe. “Although this is slightly above the low vacancy numbers we saw in 2011 and 2012, those low numbers were the result of depressed production with few new apartments coming on line.
“Meanwhile, the strength of the MPI, the production index, in the second quarter is not surprising, given that we’ve seen employment improve, which allows younger consumers to form their own households.”
The bottom line for property managers is mostly positive. There will continue to be more rentals to manage while the current low vacancy rate holds steady. What’s not to like about that?