More multifamily improvements may help homeownership rates

Improvements in the multifamily market may help residential housing.

While the multifamily market has improved significantly since the recession, this could actually help improve the overall housing situation, according to the University of California, Los Angeles, Anderson Forecast and the UCLA Ziman Center for Real Estate.

Due to the recession, the housing market was affected by a wealth decline of approximately $7 trillion. Much of this surfaced in home prices dropping by more than 30 percent on average, the report explained. Many homeowners were foreclosed upon, which brought the total rate of homeownership to 66 percent last year. This will likely drop to 65 percent this year.

However, foreclosures have likely peaked already, and home sales have picked up from its bottom, according to the report. By next year, the total figure is expected to rise past 5 million units next year, which is an improvement, but still lower than the peak of more than 7 million in 2005.

Due to the difficulties in the housing market's recovery, property management companies have experienced a boom in business, the report noted. Even with multifamily starts declining to 112,000 units in 2009 from 2005's figure of 354,000 units, this has rebounded to 260,000 units this year. Furthermore, the number of new multifamily properties could rise to 400,000 units or more in two years.

The recovery has helped vacancy rates drop significantly, as they are less than 5 percent at the national level, the authors explained. There also has been a significant rise in rental rates, and investors taking part in the booming market. Renewal price increases have jumped by approximately 4 percent for properties and investment trusts have increased their own rental prices by 5 to 7 percent. Many investors have looked to these types of properties due to rental apartments becoming a more attractive option, as yields from the U.S. Treasury remain lower than 2 percent.

The rising rents have helped the notion that there will be heightened income and capital rises through the coming years, according to the report. However, this may not be a sustainable situation, as more Americans will look to purchase a home in future years as the residential market improves and commercial construction continues. This could begin to show signs in 2014, as there will be a significant amount of construction, but demand may taper-off.

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