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Cautious optimism is the proverbial tone many multifamily investors are taking as the start of a new decade is only a few weeks away. The whispers of a slowing economy have turned to a dull roar, but according to recent IMF reports, the U.S. economy is expected to steadily grow 2.1% over the next year. As economic pessimism lifts the outlook looks rosier for multifamily investment with continuing job growth. Without indication of a significant downturn, steady pace and predictability will be key performance indicators for multifamily investment as the balance of supply and demand level off and favorable financing conditions continue with the government-sponsored enterprises. Here are five trends to watch with the start of a new decade.

1. Most Compelling Commercial Asset

Considered an oasis of lower volatility investing and a safe haven for market unpredictability, multifamily remains the most reliable bet for commercial investors. Relative to other commercial investing options, the macro demand trends for multifamily are comparatively strong moving into 2020. Coupled with liquidity, a steady stream of diversified renters on short-term leases, and lower capital costs required for upkeep, multifamily means less turbulence in a potentially stormy investment environment. But the biggest comparative advantage for multifamily when a downturn hits? The liquidity buffer provided by access to agency lending, which investors in most other property types cannot obtain.

2. Favorable Financing and Lending Factors

While multifamily enjoys a robust backstop for financing with Freddie Mac and Fannie Mae, we saw some mid-year turbulence for debt financing in 2019. The Treasury bounced around, and concerns were raised on the remaining lender allocations for the second half of the year, especially after a robust transaction market early in the year. Thankfully, allocations were renewed heading into the fourth quarter, and smoother sailing is expected as we head into 2020. The healthy lending caps are expected to benefit multifamily in providing certainty that debt capital will be available within the pricing levels that we’re accustomed to.

3. Infrastructure Improvements Creates Housing Demand

The U.S. has yet to see a massive influx of infrastructure funding since the Federal Aid Highway Act of 1956. As a result, much of the U.S. transportation and utility systems are now on the brink of disarray and in desperate need of an upgrade. Inaction on the federal level has pushed cities and states to take the lead and invest in its own infrastructure. Considering the economic impact of transit-oriented development, local public-private investments are creating important real estate opportunities for multifamily. For example, the Atlanta BeltLine, which is slated as the most comprehensive revitalization effort ever undertaken in Atlanta and among the largest urban redevelopment projects underway in the U.S., is connecting 45 intown neighborhoods with a 22-mile loop of multi-use trails, streetcars, and open space parks. Set for completion in 2030, approximately one-fourth of the BeltLine is now open. In the meantime, we’ll see real estate developers lining up to meet new demand while city officials focus on affordability by passing a $11.9 million budget specifically for affordable housing development. The need for infrastructure investment will continue to play out in 2020 as evolving demographics, economic dynamics, and lifestyle preferences stimulate housing demand. Smart infrastructure investment will be closely tied to the growth of multifamily moving forward.

4. Continued Challenges for 2020

Affordability challenges are now a mainstay, not a hiccup, of the current housing market. While wage growth has ticked up, it’s not enough to cover the rise in rent in most markets. Right now, a full-time minimum-wage worker could not afford to rent a modest two-bedroom apartment anywhere in the U.S., according to an annual report by the National Low Income Housing Coalition. Both the candidates on the 2020 presidential campaign trail and big tech companies, such as Google and Microsoft, are taking note in making housing a bigger issue and pledging to help fund affordable options with the most promising proposals centered around addressing the need for greater supply versus counterproductive rent control schemes.

5. Sustainable Supply and Demand

According to Fannie Mae market commentary, multifamily construction reached historical peaks at the end of 2017 through 2019. Next year is expected to moderate as the potential demand will balance with the current supply underway. Fannie Mae forecasts that the recent mismatch of supply and demand for new Class A multifamily units in many metropolitan areas is expected to be short-lived, lasting only the next 18 to 24 months. However, most markets, including Nashville, Tenn., and Austin, Houston, and Dallas-Fort Worth, Texas, have already seen a downturn in supply levels and will continue to see a decline through 2020. Some Southeast markets, including those in Florida and Atlanta, are already enjoying sustainable levels of supply. As for Texas, we can expect a rebound in Houston as supply is at the lowest percentage of existing housing stock in all of the major MSAs. The demand side of the equation will continue to strengthen as Houston is slated as a top five job creation cities in the country. The expected supply moderation over the next few years, coupled with expectations for continued demographic trends and solid job growth, should result in national multifamily rental demand remaining stable for 2020 and longer.