US apartment demand soars as families downsize

Published 23rd Mar 2011

The US housing crisis has no doubt changed the face of the American property market forever, but that's not necessarily a bad thing. Gone are the days of the bloated suburban home and its associated high maintenance costs and outrageous mortgage payments - instead, US families are moving out of their colonial mansions and downsizing to affordable, efficient apartment living.

Whilst demand for single family homes has stalled since the property market collapse, the National Association of Homebuilders reports an upswing in demand for multifamily developments - in fact, when compared to the actual amount of new apartments being built, demand is outstripping supply by around 150,000.

"Although we are forecasting construction of around 133,000 new multifamily residences in 2011, that is far short of the 250,000-300,000 that would be required to keep supply and demand in balance", said NAHB Chief Economist David Crowe. "In addition, we have yet to make up for the insufficient number of new apartments that should have been built over the past two years."

While the housing collapse put the brakes on development and made credit almost impossible for builders to obtain, the desire amongst cash-strapped homeowners to switch to renting, combined with the entrance onto the market of a new generation of home-leavers seeking low-cost, energy-efficient housing, meant demand kept growing as new supply dried up.

Now, with rental vacancies in multifamily complexes at their lowest since 2006, and demand for rental apartments at its third highest level in 25 years, the apartment building industry appears to be facing the opposite crisis to the glut of empty homes that began to appear in the US immediately following the housing crash. This is good news for buy to let investors, as lack of finance available on the local market is still keeping purchase prices at rock bottom, while more competition on the tenancy market is seeing rents increase.

"People have the money in their salaries to pay their mortgage, but they don't have money in their savings to put down a 25 percent deposit for a condominium or a home", said Rick Andritsch of Wisconsin-based developers VJS Construction. "That is driving the demand for apartments because those who were planning in 2007/2008 to buy a condo are now renting." Chairman of the NAHB's Multifamily Leadership board, Charles Brindell, agreed that this phenomenon was putting upward pressure on rents. "We are already seeing increasing rents in several markets across the country", he said.

Source: ' TMC '

View All Latest News