The multifamily apartment market in the US remains a favorable investment opportunity for passive investors, even as apartment supply soars nationwide.
According to a recent analysis by RealPage, the U.S. apartment market absorbed 90,827 units in Q3 2023, the largest quarterly total in nearly two years. However, demand for rental apartments remains high, particularly in major metropolitan areas with strong job growth and limited supply.
RealPage attributes the strong demand for rental apartments to a number of factors, including:
- Strong job growth: The US economy added an average of 372,000 jobs per month in 2023, boosting the unemployment rate to a near-50-year low. This job growth is driving demand for housing, including rental apartments.
- Limited supply: The US rental vacancy rate is below the long-term average, indicating that there is a shortage of rental units in the market. This is giving landlords the upper hand in negotiations and allowing them to charge higher rents.
- Favorable demographics: The US population is aging, but the millennial generation is now the largest generation in the country. Millennials are more likely to rent apartments than previous generations, which is further fueling demand for rental housing.
While the influx of new supply has shifted the balance of power back to renters to some extent, RealPage notes that “it’s a good reminder that the challenges facing the apartment sector today have nothing to do with demand fundamentals, and everything to do with a 50-year high in apartment construction combined with expense pressures and the rapid spike in interest rates upending the financing market.”
Despite these challenges, RealPage remains optimistic about the long-term outlook for the multifamily apartment market in the US. The company notes that “the fundamentals of the apartment sector remain strong, with demand outpacing supply and occupancy rates remaining high.”
Passive investors can gain exposure to the US multifamily apartment market by investing in a real estate syndication. A real estate syndication is a type of investment vehicle that pools money from multiple investors to purchase and manage a real estate property. This allows investors to gain access to investment opportunities that they may not be able to afford on their own.
If you are a passive investor looking for a stable and potentially lucrative investment opportunity, multifamily apartment investing in the US is worth considering.
In addition to the general benefits of investing in multifamily apartments mentioned above, there are a few additional benefits that are worth noting in the current economic environment.
First, multifamily apartments are a relatively recession-resistant asset class. This is because people need housing even during economic downturns. In fact, demand for rental housing often increases during recessions, as people who lose their jobs or are forced to sell their homes may need to rent.
Second, multifamily apartments can provide investors with a hedge against inflation. This is because rents tend to rise in line with inflation. In fact, rents have outpaced inflation in recent years.
Overall, multifamily apartment investing is a good way for passive investors to gain exposure to a stable and potentially lucrative asset class that is relatively recession-resistant and can provide a hedge against inflation.
If you are a passive investor looking for a stable and potentially lucrative investment opportunity, multifamily apartment investing may be the vehicle for you.
