For years now, there's been talk on an oversupply problem, specifically at the upper end, in the apartment industry.The Wall Street Journal's Justin Lahart thinks that supply has finally reached a point where it may be tie for a "cooling-off period." (subscription required.)
The problem, says Bank of America Merrill Lynch economist Michelle Meyer, is that much of the recent apartment construction has been concentrated in luxury buildings in the largest U.S. cities. Now it looks as if these high-end markets may become oversupplied. Indeed, the Federal Reserve’s most recent survey of loan officers showed tightening lending standards for multifamily commercial real estate—an indication that banks may view funding luxury apartments as a riskier proposition.
But that doesn't mean there isn't a need for more rentals. There is. Just not at the upper end, according to Lahart.
There is still plenty of demand for more affordable rentals, but before the market can start meeting that builders will need to change their focus.