Each of my econometric presentations include what I see as megatrends that will last at least for the year if not longer. This year includes:
- Time to overweight in real estate (just look at a strongly-valued stock market, low interest rates and gold now 27 percent off the September 2011 peak)
- More residential renters than owners (implying a decade-long decline in homeownership and an increase in renters)
- While the Federal government may not have too much debt, they do not have enough cash flow to make their payments (which says we have too much debt. No one in Washington DC seems concerned about this, and Congress and the President are just kicking the can down the road, raising the debt ceiling to accommodate such.)
- Concern that government regulators are imposing their beliefs, politics and lifestyles rather than legislative intent when writing regulations (No further comment needed)
Today’s blog focus is on increased renters – from the supply perspective of new multifamily permits issued. Forecasting for new multifamily deliveries is made easier given the notification months in advance of the issuance building permits.
The number of new multifamily permits issued has now declined on an annualized basis for the past two consecutive months at a double-digit rate according to Axiometrics, as reported in an article in Multifamily Executive. June 2014 saw an annualized rate of 301,000 units permitted, down from 363,000 in May 2014 – a decline of 17.1 percent.
So where are the top metro markets for new multifamily permits in 12-months ending June 2014?
Is there a concern against overbuilding? In some markets, yes. An upcoming blog discusses current commercial real estate cycles, and I urge you to pay special attention to where markets are with respect to supply, demand and rents.
To read the entire article from MultiFamily Executive click http://www.multifamilyexecutive.com/building-permits/top-10-metros-for-new-construction-permits_o.aspx?dfpzone=general
What I have learned over the past several decades working and analyzing real estate is that if a builder or developer can get a loan, they will build something – sometimes regardless of what overall supply and demand are at that time.
While we always talk about investment decisions, as important is the exit strategy today.
At some stage we can and likely will overbuild many multifamily housing markets. That time may be sooner than most realize.
Ted