Top Predictions for 2018

By Meeghan Fuhr

Doug Bibby

At the recent NMHC Apartment Strategies Outlook conference in Orlando, Doug Bibby, president of NMHC, opened the event by inviting the real estate professional in attendance to participate in a poll gauging their predictions for the year ahead. According to Bibby, the results gathered from last years’ poll ended up being 100 percent accurate, with predictions coming to fruition by the end of 2017. Last year’s poll questions had an emphasis on real estate fundamentals, drawing on topics commonly talked about in the multifamily market as of late, including new supply and absorption as well as moderating rent growth. While these topics continue to maintain their prevalence in the market, this year’s discussions had a heavier emphasis on tax reform and its implications.

So what do the biggest players in real estate believe is in store this year? Here are the poll results:

1. 2018 will be the last good year of the cycle; a correction will hit us in 2019.
   1. True – 45 percent
   2. False – 55 percent
2. Starts will drop again in 2018, but will remain near the 325,000 units estimated to be needed annually to keep up with demand.
   1. Agree – 72 percent
   2. Disagree – 20 percent
   3. Don’t Know – 8 percent
3. 2018 will see rent softness in Class A properties, but Class B and C properties will experience continued moderate growth.
   1. True – 82 percent
   2. False – 18 percent
4. Debt financing will be more costly and tougher to find in 2018, as it was in 2017.
   1. True – 77 percent
   2. False – 23 percent
5. Equity capital will be much more selective in 2018.
   1. True – 72 percent
   2. False – 28 percent
6. Where will cap rates end the year?
   1. Down – 19 percent
   2. Up – 33 percent
   3. Unchanged – 49 percent
7. Will the 10-year finally break through 3 percent in 2018?
   1. Yes – 52 percent
   2. No – 48 percent
8. Will 2018 be the year secondary and tertiary markets begin to see more development?
   1. Yes, we will see more building in secondary and tertiary markets – 66 percent
   2. No, the level of building in secondary and tertiary markets will remain the same – 34 percent
9. Now that tax reform has passed, there is speculation sales will increase this year. Do you think that’s true?
   1. Yes, sales will increase to take advantage of new tax rules – 33 percent
   2. Yes, sales will increase but it had nothing to do with new tax rules – 25 percent
   3. No, sales volume will continue to decline – 27 percent
   4. Don’t know – 15 percent
10. How often do you include smart home features in your properties when developing or renovating?
    1. Sometimes – 57 percent
    2. Always – 21 percent
    3. Never – 22 percent
11. How do you anticipate tax reform will impact your business?
    1. No impact – 8 percent
    2. Some impact – 50 percent
    3. Significant impact – 11 percent
    4. Too early to tell – 32 percent
12. With tax reform passed, 2018 is the year Congress will finally address Housing Finance Reform.
    1. True – 17 percent
    2. False – 83 percent