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Commercial Department: Q&A: National Multifamily Housing Council: August 2016


Q&A: National Multifamily Housing Council

Multifamily-housing market continues to shine

For a half-decade, multifamily housing has been one of the strongest performers in commercial real estate, registering steady rent increases and historically low vacancy rates. Mark Obrinsky, chief economist for the National Multifamily Housing Council, spoke with Scotsman Guide about the short- and long-term prospects for the market.

Multifamily has been on a long run-up for investors, in terms of prices and rents. Will that continue?

We get anecdotal reports that a bank here or there might be tightening up, or loans are harder to get, but I haven’t seen anything that would indicate a contraction. Rent growth has been running higher for a longer period of time than, I think, many people expected. These aren’t all-time high rates of rent increase, but they are solidly above average. So, for the last year and a half, the average has been about 4.5 percent to 5.5 percent rent growth. I think a lot of people are expecting that to subside a bit this year, and be more like the 3 percent to 4 percent range. That would make sense because in some markets, it’s taken a while, but we’re finally starting to deliver apartments at the level we’ve had demand for. Now we’re seeing that, as those apartments are delivered, you get a temporary pause in rent growth. Until some of this new space is leased up, you’re going to see rent growth at a little bit lower rate. 

There are some overall trends that have worked in favor of the mutifamily sector, such as rising home prices and millennials renting rather than buying. Do you see either of those conditions changing?

On home prices, we have, indeed, seen a pickup in the last year. So, if you start looking at comparisons of the cost of renting, compared to the cost of owning, they have started to tilt, once again, in favor of renting. Millennials I think of a little differently. People in their 20s are always more likely to be renters than to be owners. Sure, people who get married and have children are more likely to be looking for alternative housing, whether that’s a single-family house or a really large condominium. But they are doing that later in life than they used to. That’s not a dramatic new phenomenon. This has been a long-term gradual change. 

What other trends do you look at to gauge the prospects for multifamily?

There is a demographic trend that is so obvious no one ever mentions it — which is, we have an increasing population in this country. Not every country does, anymore. The population of Japan has been going down, and [the population of] Germany has been going down. But if you have more people, you’re going to need more housing, and through most of the years of our nation, at least for which we have any data, we’ve needed both more rental housing and more ownership housing. And, by the way, I’m not making a value judgment when I say that. Can the globe support this many people? I’m not making a judgment one way or another on that.

What geographic markets seem the best for multifamily investments?

I don’t know quite how to answer that well, because how well your investment does depends upon both how the asset performs, so to speak — the net income — and also the price you paid for it. What I do think I can say, is that most of the cities we’ve been talking about for years as places where we’re seeing relatively strong  increases in demand, that level of strong demand is still the case.

Mark Obrinsky is senior vice president for research and chief economist for the National Multifamily Housing Council, with principal responsibility for housing and economic research. He is the former director of regulatory policy and senior economist at Fannie Mae, and also previously served as deputy director of the economics department at the U.S. League of Savings Institutions.


Bill Lewis was editor of Scotsman Guide Commercial Edition. For questions about this article, call (800) 297-6061 or e-mail

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