With interest rates at historic lows, it’s easy to believe that homeownership will encroach upon the success of the multifamily industry, which has fared quite well during the recession.
But homeownership is still becoming less of an option for plenty Americans, and industry veterans are doubtful that folks will be lured into it to the point where it would hurt multifamily owners, according to panelists at the recent Multifamily Executive Conference.
“There will be an uptick of people buying homes, but it’ll far be outweighed by folks coming in with the renter-by-choice mindset,” says Justin Marshall, senior vice president of property operations at Fogelman Management Group. “They want location. They don’t feel like they need to buy a home to validate that they’ve made it or they’re all grown up. So I don’t see it as a significant threat.”
Job growth will equal some added security, Marshall says, but until then, renters will continue to favor flexibility thanks to the economy’s uncertainty.
It's not as though people are abandoning the American Dream: 59 percent of Americans believe it’s a good time to purchase a home, according to Brad Cribbins, senior vice president with Alliance Residential. They just don't have the firepower to pull the trigger.
“If they had the down payment, they’d do it,” Cribbins says. “[But] there’s a fear in the marketplace on whether or not the investment will fare well."
Although renters are less able to achieve home ownership now, they still expect a certain level of amenities and technological capabilities in their living space, says Melanie Gersper, senior vice president of Regional Operations at Bell Partners.
“Everyone wants the downtown, urban, apartment,” Cribbins adds.“I’m not sure if that’s just that college student coming out. I think it’s a bigger spread.” If a development is in the right location with the right amenities, renters will still seek them out.
And with changes expected to hit Fannie and Freddie, not to mention the looming possibility of tax reform, the multifamily industry may continue to have the upper hand, he says. “If they change the home mortgage interest deduction, it’d be a net positive for the multifamily side, “Cribbins said. “Less people will want to purchase homes.”