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10) Still big focus on occupancy and retention and resident experience. Vacant units = zero cashflow. Continued momentum on various tech to give residents and prospects on-demand service and faster solutions to basic processes/requests.

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9) Lots of bullishness on 5-year outlook for Sun Belt as supply drops off but demand expected to remain strong. One panel listed DFW as only U.S. market favored to outperform in both 3- and 5-year outlooks.

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... Some coastal cities (LA, SF, OAK, NYC, DC's Maryland suburbs) have been redlined by many institutions that previously favored gateway cities, for both development & acquisitions. "Gateway adjacent" markets (i.e. Orange County, Northern New Jersey) and politically stable suburbs remain favored.

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8) Regulatory risk is MUCH bigger variable than ever. Some groups are even trying to figure out how to model future regulatory risk that could torpedo pro formas and exit strategies as occurred in places like St. Paul, MN, and Montgomery County, MD....

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7) Banks are getting back in the game on construction loans. They're not looking to gain exposure, just to maintain it. As current projects finish and refinance to permanent debt, banks have little in the pipeline so are competing again on terms (but nothing crazy).

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6) Some capital is looking at new development again, but don't expect a big flurry of new starts. Few projects pencil out. What does is typically lower-cost suburban garden, "cookie cutter" product. Challenge to build to today's market rents without subsidies, so big focus on construction costs.

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5) More value-add strategies, but with very narrow buy box focused on higher-income suburbs in good school districts etc. (Few apartment renters have school-age kids, but school quality tends to be correlated with favored demand drivers.)

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4) More broadly: There remains a gap between what institutional capital is targeting and what distress exists (older assets in less desirable submarkets, often with economic occupancy and cap ex challenges).

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Because there’s little of it on the market, and the discounts aren’t that big (especially in suburbs) unless you’re buying in less-favored, high-risk markets like Los Angeles or Oakland.

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... few deals pencil out with higher debt costs unless prices fall, and sellers are holding firm on prices. 3) Lots of groups raised capital targeting newer assets below replacement cost, and that strategy looks good on paper, but it’s proven (so far) very difficult to execute at any scale. Why?...

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... completions are now trending downhill and should be below average by next year. 2) But deal flow is stagnant because of rates. It appeared 3-4 months ago that we could see sales volumes rebound as treasury yields dipped into 3s, but now we're back in mid-4s. This creates a math problem b/c ...

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Jay Parsons @jayparsons.bsky.social · 23/01/2025

Multifamily's biggest investor event, NMHC Annual Meeting, wraps up today. Here are some takeaways: 1) Lots of short-term uncertainty due to rates, but mid/long-term bullishness with strong demand and falling supply. A 50-year peak in supply is currently pushing rents negative, but...

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(Note these are apartment-style BTR communities -- typically platted multifamily, not the "excess inventory" homebuilder SFR homes in new subdivisions.)

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Jay Parsons @jayparsons.bsky.social · 23/01/2025

Great chart from John Burns showing that more than HALF of the existing build-to-rent units were built in just the last two years. It's a good reminder that we're still in the early innings of build-to-rent.

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Good reminder that while interest rates are NOT well correlated with cap rates, they do have a tremendous impact on deal flow. Higher rates = fewer workable deals. Any optimism for rebounding sales volumes is now on hold again. We could still see it in 2025, but probably not in the next few months.

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As a result: -- The apartment sales volume survey index came in at a four-quarter low. -- The equity financing survey index came in at a five-quarter low. -- The debt financing survey index came in at a six-quarter low.

It was rates, obviously. At the end of Q3 last year, the 10-year Treasury yields were back into the 3s. Today, they're in the upper 4s again.

Jay Parsons @jayparsons.bsky.social · 21/01/2025

What a difference 3 months make. This NMHC survey perfectly captures the mood swing among apartment executives. Back in October, bullishness was at a 2-year high. Here in January, optimism has been put on hold again. What changed? Not supply, demand, rents or the economy.

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Final numbers for 2024: Multifamily builders started 254,100 fewer units than they completed. That's the second-biggest deficit on record, behind only 1974. And multifamily starts in 2024 totaled lowest since 2013. Yet another clear indicator that new apartment supply will plunge by 2026.

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Jay Parsons @jayparsons.bsky.social · 16/01/2025

The rental housing business might be the most fragmented industry in the United States. Even the biggest owners are rounding errors in terms of market share. No company comes close to owning even 1% of U.S. apartments or single-family rentals.

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Jay Parsons @jayparsons.bsky.social · 15/01/2025

For anyone concerned about junk fees and hidden costs driving up rents, try to plan/entitle/permit/build/operate a new apartment property in a large U.S. city.

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Jay Parsons @jayparsons.bsky.social · 12/01/2025

Miami is a tough market to analyze for housing bc there are so many unique variables with retirees, foreign investors/part-time residents, and of course landlocked.

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Jay Parsons @jayparsons.bsky.social · 12/01/2025

States that actually build housing = more housing available = comparatively better affordability.

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Jay Parsons @jayparsons.bsky.social · 10/01/2025

it's still a pretty small niche. certainly seeing more of it, but the vast majority of empty office buildings are not well suited for conversion to residential due to locations, floor plate sizes, costs, etc.

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big questions for sure. i do think rent growth will re-accelerate, though nowhere near the peaks of what we saw in 2021-22. i would also think demand moderates, too. Tough/unlikely to maintain absorption numbers like that.

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That's a remarkable story. Supply doing what it does when added in large quantities -- putting downward pressure on rents, even when there's a ton of demand. Build, baby, build.

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We just saw the 2nd best year on record for apartment demand, and yet rents were basically unchanged nationally (and actually falling in many growth markets) thanks to the massive supply wave hitting the market in 2024....

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Lastly: Imagine what would be happening with rents right now if not for new apartment supply nearing 600k units in 2024 -- the biggest number in 50 years. Without that much supply, we'd be seeing well above-average rent hikes right now. Instead, it's the opposite -- all due to supply.

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... while certainly more renters stayed in place due to high home prices and mortgage rates, it doesn't explain the ~600k net new apartment households created in 2024.

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2) I'm sure we'll see plenty of commentators linking strong apartment demand to weak home sales. And it's an easy connection to make, but also grossly simplistic. Remember: Households typically rent before they buy. So ...

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Couple narrative violations / mythbusting from the latest data: 1) Renters signing new leases for market-rate, professionally managed apartments are coming in well qualified with rent-to-income ratios below 23%.

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First, on the numbers: Total absorption depends on which source you use, but in the range of 557k units (CoStar) to 667k units (RP). Either way, it's likely the 2nd best year on record behind 2021.

The final numbers are in, and apartment demand came in WAYYYY above anyone's expectations for 2024. I was probably as bullish as anyone going into 2024, but not THIS bullish. The U.S. added ~600k apartment households in 2024, and the story isn't as simple as you might think.

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Jay Parsons @jayparsons.bsky.social · 02/01/2025

Anything that makes housing construction more expensive makes housing costs/rents more expensive.

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That would guarantee units sit vacant for months between leases.

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Jay Parsons @jayparsons.bsky.social · 02/01/2025

So you'd be okay allowing someone needing a home to wait weeks/months for PHAs to identity a hole in a window screen before a tenant can move in? Easy fixes to be had if we prioritize collaboration over demonization.

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Jay Parsons @jayparsons.bsky.social · 01/01/2025

By doing so, people in need of a home move into a home sooner. Market inefficiency is addressed (longer vacancy). And property managers aren't punished with red tape and extended (and unpaid) vacancies to accept voucher holders.

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Jay Parsons @jayparsons.bsky.social · 01/01/2025

Easy compromise: End discrimination against voucher holders by legalizing same leasing process as a non-voucher holds goes through. That means PHAs adopt most property managers' terms rather than vice versa, and don't hold payments hostage.

Jay Parsons @jayparsons.bsky.social · 01/01/2025

Voucher holders are often required to wait out bureaucratic box checking before they can move into a rental. Meanwhile, the unit just sits vacant. Lose/lose. Non-voucher holders just sign a lease and move in. Why do voucher programs treat voucher holders like 2nd class citizens?

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Jay Parsons @jayparsons.bsky.social · 31/12/2024

This is why every apartment and single-family rental investor should CHEER for a strong, healthy for-sale housing market. The downstream impact of homebuying is massive. Rising tide boosts all ships. Strong years for homebuyers = strong years for rental investors, too.

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Jay Parsons @jayparsons.bsky.social · 31/12/2024

Very simple and practical tips for renters here -- especially in high-supplied markets like Austin.

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Jay Parsons @jayparsons.bsky.social · 20/12/2024

basically it's when someone(s) go off on their own after previously sharing a housing unit with someone else. such as a young adult leaving the nest.

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Jay Parsons @jayparsons.bsky.social · 20/12/2024

This is a good article, thanks for sharing. Yes, I always look at Census permit/start/completions data as directionally helpful but the more granular you get, the spottier it becomes. Private sector data providers tend to do a much better job.

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Jay Parsons @jayparsons.bsky.social · 20/12/2024

As I wrote a year ago: Peak rental demand and rent growth have ALWAYS occurred during periods of a robust for-sale home market. When homes are selling, we typically see more household formation. So while there are more move-outs to purchase, there's ample demand coming in to backfill those units.