New from MPF Research: 2017 Crystal Ball
MPF Research is constantly pumping out data to keep you on top of what’s going on in the multifamily industry.
We’ve summarized the top predictions from MPF Research for 2017, based on a recent multifamily webcast featuring RealPage Chief Economist Greg Willett and MPF Research Vice President Jay Parsons, with special guest Philip Martin of Chicago-based property management and investment group Waterton.
Permit volumes and somewhat stingier lenders signal a slowdown on the horizon, but development levels remain well above historic norms, with over half a million units under construction in the nation’s largest 100 markets at the end of 3Q 2016. The panelists expect final tallies to show around 300,000 new units delivered in 2016, a level not seen since the mid-1980s, and believe deliveries will continue to break records through 2017.
While MPF Research expects apartment demand to remain strong in 2017, they believe it won’t quite be able to keep up with supply – resulting in a modest (70 basis point) drop in occupancy.
However, they expect rent growth to remain solid, with increases for new leases to come in between 3% and 3.5% in 2017 compared to 4% in 3Q 2016. Jay Parsons of MPF said “those are still very good numbers by historical measures, even if lower than what we’ve seen for most of this cycle.”
Capital markets and deregulation
MPF Research reports that when the numbers come in, apartment sales volumes in 2016 will be right around where they were in 2015 ($153 billion).
The big question is what will happen as the Trump administration begins throwing its weight around, specifically in regards to deregulation.
“They will almost certainly target two of the hot-button regulations that commercial real estate buyers and lenders have complained about loudly,” said Parsons: “The risk retention rules that have been blamed for slowing CMBS lending, and the new rules on so-called High Volatility Commercial Real Estate loans, which are being blamed for slowing construction lending.”
“It’s possible we’ll see a little slowing in sales activity through the early part of 2017 as the dust settles before seeing improvement later in the year,” Parsons said. “So year-end 2017 numbers could end up looking a lot like 2015 and 2016 in terms of volume.”
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