The second quarter of 2017 has proven to be a spectacular one for Multi-Family absorption. In fact, it was the best quarter we have seen since 2006 (and probably this entire cycle)! While we can always expect an uptick in the second quarter due to job creation, this particular second quarter was of note. National rent trends have risen 2.7% this year and the third quarter projection looks good, however, the fourth quarter projection does not.
JOB GROWTH IN THOUSANDS LAST 6 MONTHS BY INDUSTRY
Home ownership rates are currently declining and millennials are renting longer. The reality of the situation is that construction costs are rising and construction starts are down which makes new construction unaffordable for the average millennial. Furthermore, after the “Great Recession”, lenders are more apprehensive to fund millennials because they can’t bring a 20% deposit to the table. Due to the rising debt in our country, lenders fear millennials won’t be able to pay back the loan. There has been a 60% increase in debt and $26,000 of it being student loan debt. This is a major factor in the increasing rentership rates. The average single family homeowner is 26 years old but there is a peak in renters ranging from 35-65 years old which is even greater than millennials.
SUPPLY, VACANCY, RENT GROWTH
- Only 11% of renters earn over $100,000
- 64% of renters earn less than $50,000
- New construction is targeting high income earners
- Atlanta’s housing market is under supplied
- Asking rent is on the incline
- Atlanta is affordable which is favorable
- Atlanta is outperforming our peers on the national average
Atlanta is seeing the most growth in the Multi-Family and Office markets and is right in the middle of the nation for growth according to the National Average for vacancies and, as of now, Atlanta vacancies are at 10% and we can see that many trophy deals (deals over $100 million) are falling off and trading less frequently. Additionally, many companies are expanding to Atlanta but they are partnering with Multi-Family developers to provide housing for their employees since Atlanta has an under supply of housing at this time.
WHAT DOES THE FUTURE OF THE MULTI-FAMILY MARKET LOOK LIKE?
17Q1 was the weakest quarter since 2012 and 17Q2 was the best second quarter ever in this cycle. Cap rates have flattened and we are at an influx. Atlanta will be a leader in household formation and we are on track to be the 3rd in the nation within the next 5 years and we will have the biggest pool of renters ages 24-35 in the nation. Second quarter was amazing. Let’s see what third quarter has to offer.
ANNUAL JOB GROWTH
WHERE IS THE GROWTH HAPPENING?
- South Dekalb
- East Dekalb
- South Fulton