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Renters Are Paying More Than Ever

Perhaps it's because millennials are still trying to handle their student loan debt that they're not moving out of their apartments, but just about any way you look at it, 2018 was the best year for multifamily real estate this century. According to a recent report in HousingWire, renters paid more for housing than they ever have before.

To top that off, Freddie Mac and Fannie Mae both had banner years and commercial and multifamily debt hit an all-time high, all while delinquencies remained at historic lows. This is pointing to clear evidence that last year was the market's best year since 2000.

The new report from CBRE shows the following: net absorption hit 286,600 in 2018, the highest level since 2000, topping 2017's 277,000 total, and marking the highest total this century.

Multi-family construction activity was also high last year, with 267,900 units completed in 2018, slightly lower than the previous year when completions came in at approximately 274,000. That figure notwithstanding, 2017 was a record year itself, with the highest number of completions since the 1980s.
Absorption rates provide information on the leasing rates of a rental market or an individual property over a time period known as the absorption period. They are most telling when compared to the rates from other time periods or other properties. The report for 2018 shows multi-family absorptions were higher than completions for the second year in a row.

Beyond that, multifamily acquisitions were at their highest level in 19 years, up 12.1% from 2017, CBRE's report stated. Also according to the report, multifamily investment totaled $50.9 billion in the fourth quarter, the highest in any quarter since the fourth quarter of 2015.

As CBRE notes, all this demonstrates a "strong appetite for multifamily assets by investors of all types outweighed concerns over rising interest rates, possible late-cycle exposure, and relatively low returns."
As for vacancy rates, the report shows it at 4.5% in the fourth quarter, down 20 basis points from the same time in 2017. The 2018 fourth-quarter vacancy rate was also the lowest, leading to strong investments in 2019.

Source: HousingWire, CBRE, TBWS