Investors planning to operate and purchase single-family rentals may see increased competition from the multifamily sector this year, as apartment industry stakeholders also work to meet the demand for rental housing.
Construction is outperforming the typical recovery pace for apartments, according to Fannie Mae, which recently indicated that the multifamily sector may expand by one-third and start as many as 231,000 new units this year. In comparison, only 178,000 multifamily housing starts took place in 2011. The momentum is projected to accelerate into 2013, resulting in 278,000 new starts that year.
The government-sponsored enterprise’s analysts note that multifmaily building permits were up in February as single-family construction slowed. At the same time, debt financing has become more available for apartments due to the high demand for rentals and the limited number of single-family homes prepared for tenants.
Much of this financing is coming from life insurers and other sources, as well as the GSEs. Momentum may shift depending on the outcome of the federal bulk REO program and other factors, potentially giving single-family owners and rental managers an opportunity to expand their operations.