Assessing the multifamily market at the start of 2018, Greg Willett, RealPage’s chief economist, likes the industry’s current position.
“ 'Stable' is the word we come back to over and over again when we talk about the overall performance,” he says. Rents climbed 2.5% in 2017, according to RealPage, while national occupancy remained at 95.1% at the end of the fourth quarter, unchanged from the year before.
“The performance is pretty much in line with the long-term norm,” Willett adds. “[The industry] performance is pretty characteristic of being really far into a market cycle.”
Willett expects rent growth to hold in the 2.5% to 3% range in 2018, but when asked what the biggest issue facing the industry is, he responded with a question of his own: How much product is going to get started in 2018?
The projects that break ground this year will come on line in the coming years, he notes, which will greatly impact the market one way or another.
“It’s just tougher and tougher to make those individual deals work,” he says. “We’ve been going through this cycle long enough that the obvious sites are in short supply, so, clearly, we’re going to start fewer units in 2018. The question is, really, to what degree?”
With respect to the new tax-reform law, Willett expects it to have a minor impact on the industry because the provisions most multifamily professionals were concerned with, like the 1031 exchange and carried interest, were kept intact. “We think the changing of the tax code has a minor short-term lift but doesn’t really change things much in the big picture,” he says.
Willett will be on stage Jan. 16 at the National Multifamily Housing Council Apartment Strategies Outlook Conference in Orlando, Fla., where he'll participate in a two-part session titled “2018 Economic Outlook and Market Implications.” He’ll be joined by Mark Obrinsky, NMHC’s senior vice president, research, and chief economist; Richard Barkham, global chief economist for CBRE; Jeff Adler, vice president of Yardi Matrix; and Jay Lybik, vice president of research services for Marcus & Millichap.
