Finding financing in some markets is easier than in others.
When the recession began, Washington, D.C. became the hottest metro in the nation for new construction and acquisition activity. The city was a beacon for the recovery, the first market out of the recession
But now, options are becoming more scarce in markets that may have "peaked too soon," and are starting to wind down.
The Bozzuto Group, which has a large presence in the Washington, D.C. metro area, is moving forward with developments in the area despite the fact that many industry experts are skeptical of the district’s health.
Dan Murphy, CFO of the Bozzuto Group, was one of about 100 multifamily finance professionals who responded to Apartment Finance Today’s annual CFO Survey.
About 15 percent of the CFO’s surveyed pegged D.C. as one of the markets most at risk of overbuilding while about 10 percent also chose Seattle as an at-risk market.
The Greenbelt, Md.-based company doesn't plan to alter its course; Murphy believes the risk of overbuilding is short term.
“I feel confident that when you look out on a 24- to 36-month basis that supply and demand will have equalized well,” he said. “D.C. is still a strong market going forward.”
Buy vs. Rent
Although many are viewing the D.C. market as hitting a plateau for rent growth, Murphy doesn’t believe there will be a ceiling to hit just yet.
“People are choosing to rent as a lifestyle choice,” he said. “There isn’t as much of a ceiling on it because there is a direct correlation to homeownership and people choose to pay more in rent if it fits their lifestyle.”
Still, the health of the single family market is something to watch while crunching numbers for the upcoming year.
As the single family market improves, the demand for apartments and rental housing will decelerate. Murphy said multifamily developers shouldn’t panic just yet, but should keep a watchful eye on job growth and employment numbers as key indicators.
“It keeps us cautious about whether or not we can increase rents and whether or not the market can absorb the units that are under construction because of the concern about job growth,” he said.
Lindsay Machak is an assistant editor for Multifamily Executive. Connect with her on Twitter @LMachak.