High wage job growth and millennials forming their own households should pace local demand for apartments in the coming year, a Fannie Mae executive said in San Diego on Monday.
“Just the demographics continue to be in favor of new renters entering the space and with new renters comes demand, and it means that vacancy rates are low and will continue to be low,” said Jeff Hayward, who heads the government-sponsored enterprise’s multifamily mortgage business. “All the fundamentals at the moment are in line for us to have a great 2015.”
Hayward said millennials, those between 24 and 35, are beginning to rent apartments. Additionally, more people are moving into San Diego than leaving because of broad-based job growth. In all, it makes for an increase in demand for rental units. Hayward, speaking to reporters at the Commercial Real Estate Finance Multifamily Housing Convention at the Manchester Grand Hyatt, said these factors are indicative of the real estate market now going through some of the best times it’s going to have.
The pickup began in the latter parts of 2014, which Hayward said started slowly. Investors got off the fence when interest rates fell toward the end of the year, he said. Fannie Mae, which securitizes mortgages into mortgage backed securities, therefore increasing the number of lenders, announced Monday that it provided $28.9 billion in financing to the multifamily market in 2014. That’s up about $100 million from 2013, and well above the $17 billion the activity bottomed out at in 2010, just after the Great Recession.
“If you look at anybody’s forecast, the market will be a pretty large market this year,” Hayward said. “And as long as our lenders are there sharing risk with us we’re going to be there with them.”
In San Diego County, the roughly 4,500 building permits for multifamily units about doubled those for single family homes, census data shows. Hayward said Fannie Mae’s economists are finding that more people want to live in walkable urban areas, such as downtown San Diego. Hayward said the region is poised for continued growth in multifamily housing.
“You’re still going to have job growth here even though in the defense sector you’re going to have some cutbacks,” he said. “This really is a pretty robust economy. There’s net in migration, so there’s more people coming to this area. Anytime you have more people coming to the area you’re going to have a bit more demand, so I think this is really the classic supply-demand, there’s not as much supply as maybe need be.”
With the higher demand and lower vacancy rate, the average rents in the county are expected to increase. Last year, CBRE projected the average rent would rise 19 percent through 2019 to $1,830 per month.
courtesy of: http://www.utsandiego.com/news/