Multifamily 4th Quarter Numbers and Outlook in 2011

The apartment sector was the most attractive property investment during fourth quarter 2010, according to respondents to the RERC/CCIM Investment Trends Quarterly survey. Respondents said demand was strong, although pricing and location could be challenging.

Apartment sector volume continued to improve, increasing about 30 percent from the previous quarter on a 12-month trailing basis. The weighted-average capitalization rate decreased 10 basis points to 6.1 percent on a 12-month trailing average.

The volume of apartment sector transactions that totaled less than $2 million increased nearly 10 percent on a 12-month trailing basis, while the volume of transactions that totaled greater than $5 million increased approximately 30 percent during fourth quarter 2010.

According to Reis, Inc., the national vacancy rate for the apartment sector dropped sharply to 6.6 percent in fourth quarter 2010.

Multifamily will be very strong over the next few years. Residential housing market is going through a lot of challenges right now. New legislation could pass making buyers put down 20% in the future to buy a house. Even if it is only 10%, how long is it going to take for a person making 40k to 60k to save up 10% to 20% to buy a house and pay for closing costs? Young people are going to be renting longer. 100% financing days are over and not coming back. Combine this with foreclosures and lack of jobs, buying a house has become a lot harder. Also, there will not be a lot of new development in the near future. Less inventory will cause rents to go up.

Bottom line this sector looks promising. Financing is available and rates will remain low for the rest of the year. Any scenario let me know.


Sean Watson
Managing Partner
Watson & Donohue Capital
64 E. Uwchlan Ave #235
Exton, Pa 19341
484.680.3840
www.watsondonohuecap.com
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This is continued good news for the construction sector as we follow suit once the developers get the plans and projects approved and financed. We are looking at a very stong couple of years ahead of us in the multi-family arena especially. If anyone needs help with real number budgeting, due-diligence, entitlements, permitting, and ultimately construction please e-mail or call me. [email protected], 904-233-3338.