Pierce-Eislen Provides Overview for 2012 Apartment Market
- Nov 12, 2012
As another year begins to dwindle, many industry insiders are looking back on what has been an extraordinary time for the multifamily housing sector. Brokerage and information firm Pierce-Eislen hosted a webinar on Nov. 7 highlighting 2012’s most notable apartment markets, including detailed analyses of fundamentals that could provide insight on future performance.
Before delving into lists and rankings, however, the firm noted two distinct classes of renters—each with two subsets and different market preferences. “Lifestyle renters” includes those who are discretionary and rent by choice, as well as upper-mid-range renters with high income and no kids. “Renters by necessity” are those in the lower mid-range and workforce categories who could likely not afford to buy a home.
Pierce-Eislen notes that while there is much overlap between the two major classes on market preferences, lifestyle renters tend to be found more in cities like San Francisco, Denver, Seattle and Austin, whereas renters by necessity are more concentrated in cities like Chicago, Boston, New York and Washington, D.C.
Yet due to the continued popularity of renting in the post-recession economy, rental rates are increasing in all markets for both major categories. However, Pierce-Eislen notes that the rate of increase has been decelerating somewhat over the past few months.
In terms of fundamentals and factors that will buoy certain markets in the coming years, the firm notes that the contrast of low population and high job growth will benefit cities like D.C. and Charlotte, and that increased construction and manufacturing will boost Denver. Portland will face minimal risk of sequestration in the near term, while Phoenix is likely to see a resurgence based on renewed economic activity affecting medium- and lower-wage jobs.
Macroscopic challenges that might provide headwinds in both the short and long term include the continued European fiscal crisis, with uncertainty over Greece’s austerity measures continuing to haunt international stock markets. The approaching “fiscal cliff” situation in the U.S. will incur dramatic effects on the economy if not properly addressed, and overall fiscal and budgetary policy is likely to continue to be an issue for years to come.
Additionally, many are concerned that an oversaturation of supply is already taking place in key markets, with many worried that a multifamily “bubble” might be in the making. However, others downplay this risk, predicting that many Gen Y renters will continue to hold off on homebuying and remain renters, thus burgeoning overall prospects for the industry.