Property developers need to build as much as 4.6 million new apartments in the U.S. by 2030 to meet the demand for rental living and keep prices at bay, according to the National Multifamily Housing Council (NMHC).
Those struggling with funding should consider a multifamily FHA loan, which is offered by financial firms like Bonneville Multifamily Capital, to help with their next apartment project. That is because the NMHC’s estimate meant that developers would have to construct an average of around 373,000 new units each year.
Based on Yardi Matrix data, apartment construction has grown at an optimistic pace that could meet the NMHC’s forecast. Projects nationwide have increased to a 20-year high as most of the biggest cities in the U.S. have added rental units.
In terms of prices, the pace of growth for apartments in San Francisco has fallen over the last 10 months. A tenant only paid $2,497 in May 2017, which was 0.5% higher than the same month in 2016. Rental fees in other major cities such as Houston, Austin, Denver, Manhattan, N.Y., Boston, San Jose, and Portland have dropped as well.
Rental vacancies slightly increased nationwide during the third quarter of 2017, up 4.5% from 4.4% from the previous quarter, according to Reis. The real estate research firm said that higher vacancy rates in 50 cities indicated that supply might have exceeded demand.
This may explain the drop in prices for apartments in some cities. However, Reis said that the number of constructed apartments in the third quarter still fell on a year-over-year basis. Newly built units only totaled 47,271 units from 51,925 units in the year-ago period.
Property developers should consider the expected growth in demand for apartments as good news since it means more business for them. Despite certain challenges, there are ways to securing funding to complete building projects.