Rising interest rates are causing many to wonder if now is the best time to buy a home. According to CNNMoney, the Federal Reserve is expected to raise rates twice more this year and three additional times in 2019. These increases will continue to raise monthly mortgage costs for buyers year over year, so interested home buyers are considering buying homes now, while they’re still relatively affordable.
Still, a recent survey conducted by Trulia reveals that a mere 25% of Americans believe 2018 will be a better year to purchase a home than 2017, leaving many, particularly millennials, more comfortable renting and seeking new multifamily developments in major cities.
With this tug-of-war between home buying and renting, here are three key trends multifamily owners and developers should keep top of mind this year.
1. Renting Continues to Thrive Among Millennials
For millennials, renting continues to take precedence. This generation has been late to the home buying game for a few reasons, including slow income growth; careers that may require frequent moves from city to city; the perception that suburbs lack the accessibility and amenities of an urban center; and an overall lack of confidence to buy.
Renting gives millennials the flexibility they desire. Renters, for example, are negotiating rent discounts, free parking spaces, or waived utilities fees, giving them more power than ever to control their apartment living experience. These factors, combined with an overall decrease in supply in the housing market (especially within the budgets of first-time home buyers) have led development to pick up for apartments and rental properties to meet demand in major cities.
However, while renting might be the smartest choice for millennials now, homeownership is still on their minds for the future. A Trulia survey reports that 73% of 18- to 34-year-olds consider buying a home part of their American dream. As millennials progress in their careers, pay down their student debt, and experience changes in their family makeup, they’ll turn their attention to home buying but, most likely, later in life than their parents or the baby boomer generation did. For the time being, most millennials continue to rent and are happy to do so.
2. Luxury Condos Are the Way to Go for Buyers
A rejuvenated interest in urban living has motivated baby boomers to move to cities as they decide to downsize, but, unlike their millennial counterparts who prefer renting, this age group has its eyes on luxury, high-end condominiums.
One market in particular where condos are flourishing today is Center City, Philadelphia. Since recovering from the recession in 2012, condo prices in Center City have increased by an average of 26%. Allan Domb of Allan Domb Real Estate reports that the improved quality of city living has contributed to the attractiveness of Philadelphia as a whole. This has, in turn, raised the value of existing condos and sparked new construction in the luxury realm.
At Bock Development Group, we’re developing 2100 Hamilton, a 10-story, high-end luxury condo building in the booming Art Museum District of Philadelphia. With few high-end condos in the area currently, the 33 units will fulfill a need for buyers seeking city living without the hustle and bustle of downtown Center City.
3. Developers, Owners Must Provide Unique Living Experiences
Inflation greatly impacts increasing prices across the board, and as inflation has ebbed and flowed throughout the years, so has the housing industry. This has left some developers unable to follow through with an active pipeline of projects, due to financial constraints and circumstances. In cities particularly, developers are having a tough time purchasing land and obtaining construction materials like cranes in order to properly construct residential buildings.
For those developers who persevere and purchase land to build upon, location and amenities should be top priority for a successful development. Residents want walkability to parks, grocery stores, retailers, and places that offer life experiences. Amenities should include parking, storage, fitness centers, and security.
Even with various factors, such as rising interest rates, inflation, and supply and demand, influencing both renting and home buying, the multifamily market is looking up, especially in highly sought-after cities like Philadelphia. For owners and developers of apartments and condos alike, standing out among the competition by providing unique living experiences and amenities is key.
