Apartment Downturn Still Not Over but Prospects for Multifamily REITs are Improving, Says Moody’s Report

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Multifamily performance over the next few quarter may experience some turbulence, according to analysis by Moody's Investor Services.

Multifamily performance over the next few quarter may experience some turbulence, according to analysis by Moody’s Investor Services.

In moody’s “US REIT and REOC Review & Outlook” report, the rating agency maintained a stable rating for the multifamily REITs sector. However, it cited “the magnitude of the economic downturn” and “market correction” as contributing factors to a cloudy outlook for the apartment industry in the near term.

Moody’s said in its report that challenges to REITs continue to be high U.S. unemployment levels, now 9.7 percent;  a supply overhang from weak single-family and condo markets; and the increasing affordability of homeownership.

Philip Kibel, senior vice president and team leader of Moody’s rated REITs, tells MHN that the majority of Moody’s rated REITs have a stable outlook. And Moody’s report said it anticipated rating actions for multifamily REITs will be less negative than in the previous two years.

Moody’s has pointed out that a reasonable case can be made that “near-term supply and demand conditions pointed to the potential for a strong recovery for apartments.”

“Very little new supply is coming on line in 2010 or thereafter and demand has been building in the form of would-be renters who will be looking for apartments when they are hired or re-hired. It is worth noting as well the positive effect on multifamily demand of the echo boomers who are graduating college and reaching prime rental age,” Moody’s REITs report stated.

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