By Sam Manoochehri, SVP Multifamily Investments
With more than 50% of Americans having already received at least the first COVID vaccine shot, the outlook for multifamily is strong.
In May 2021, multifamily rents increased by 2.5% year-over-year, which nearly mirrors the rent growth in March 2020 during the onset of the pandemic.
Nationally, there is little weakness remaining in the multifamily sector. With year-over-year rent growth back to pre-pandemic levels, the recovery arrived much earlier than previously expected. One prevailing factor was the rise in the renter-by-necessity category due to many would-be homeowners being priced out of the market (despite a historically low interest rate environment, limited inventory has driven up home prices to unprecedented levels). Moreover, those fleeing gateway markets to the suburbs and elsewhere have not even been able to avoid increased demand.
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Among the top gateway markets, some areas are recovering faster than others. Cities such as Phoenix, Las Vegas, and, yes, even New York, where many banks have mandated workers return to the office, have posted some of the nation’s highest rent growth. Conversely, cities such San Francisco and Seattle, where there is a large concentration of tech jobs, are rebounding at a much slower pace since tech workers are more likely to be able to work on a hybrid or fully remote schedule. Nevertheless, renter demand for multifamily has been extremely strong this year, especially in those markets that struggled with an exodus of renters in 2020.
Looking ahead, the summer job hiring season is expected to pick up steam since more states are fully reopening for business and extra unemployment benefits are ending. Additionally, the extra stimulus money from The Fed will likely be unleashed in the economy in the form of consumption, investment and business expansion. As such, many economists are forecasting explosive growth in 2021, the likes of which have not been seen since the 1950s.